FAR Chapter 5 Income Taxes

Question 1

How to calculate total tax income expense

Answer 1

Pretax income *tax rate plus deferred liability minus deferred asset change

Question 2

How to calculate enact tax rate?

Answer 2

Step one calculate tax amount (Taxable income * current tax rate)

Step two pretax divided by tax amount from step 2

Question 3

What is the method to determine tax liabilities?

Answer 3

The balance sheet approach- the primary objective of reporting for income taxes is to recognize both assets and liabilities (current income taxes payable and deferred income tax assets or liabilities).