IA2 - Income tax (CHAP 16)

Question 1

It is the deferred tax consequence attributable to a taxable temporary difference.

A. Deferred tax liability
B. Deferred tax asset
C. Current tax liability
D. Current tax asset

Answer 1

A. Deferred tax liability

Question 2

It is the deferred tax consequence attributable to a deductible temporary difference and operating loss carryforward.

A. Deferred tax liability
B. Deferred tax asset
C. Current tax liability
D. Current tax asset

Answer 2

B. Deferred tax asset

Question 3

It is the amount of income tax payable in respect of taxable income.

A. Current tax expense
B. Total income tax expense
C. Deferred tax expense
D. Deferred tax benefit

Answer 3

A. Current tax expense

Question 4

It is the aggregate amount included in the determination of net income for the period in respect of current tax and deferred tax.

A. Tax expense
B. Current tax expense
C. Deferred tax expense
D. Deferred tax benefit

Answer 4

A. Tax expense

Question 5

The deferred tax expense is equal to

A. Increase in deferred tax asset less increase in deferred tax liability.
B. Increase in deferred tax liability less increase in deferred tax asset.
C. Increase in deferred tax asset.
D. Increase in deferred tax liability.

Answer 5

B. Increase in deferred tax liability less increase in deferred tax asset.

Question 6

Justification for the method of determining periodic. deferred tax expense is based on the concept of

A. Matching of periodic expense to periodic revenue.
B. Objectivity in the calculation of periodic expense.
C. Recognition of asset and liability.
D. Consistency of tax expense measurement with actual tax planning strategies.

Answer 6

C. Recognition of asset and liability.

Question 7

A deferred tax liability would result from

A. Interest revenue on municipal bonds.
B. Accrual of warranty expense
C. Excess of tax depreciation over accounting depreciation
D. Subscription received in advance

Answer 7

C. Excess of tax depreciation over accounting depreciation

Question 8

A deferred tax asset would result from

A. Tax, penalty or surcharge.
B. Dividend received on share investment.
C. Excess tax depreciation over accounting depreciation.
D. Rent received in advance included in taxable income.

Answer 8

D. Rent received in advance included in taxable income.

Question 9

Which is true regarding deferred income taxes?

A. Deferred tax asset is always netted against deferred tax liability.
B. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process.
C. Deferred tax asset and deferred tax liability should be classified as noncurrent.
D. Deferred tax asset and liability are classified as current and noncurrent based on expiration date.

Answer 9

C. Deferred tax asset and deferred tax liability should be classified as noncurrent.

Question 10

At the current year-end, an entity had a deferred tax liability that exceeded a deferred tax asset. Which of the following should be reported in the current year-end?

A. The excess of the deferred tax liability over the deferred tax asset as a noncurrent liability.
B. The excess of the deferred tax liability over the deferred tax asset as a current liability.
C. The deferred tax liability as a noncurrent liability.
D. The deferred tax liability as a current liability.

Answer 10

C. The deferred tax liability as a noncurrent liability.

Question 11

An entity shall offset a deferred tax asset and liability

A. When the taxes are levied by different taxing authority.
B. When the entity has no legal right to offset.
C. When the taxes are levied by the same taxing authority
D. Under all circumstances.

Answer 11

C. When the taxes are levied by the same taxing authority

Question 12

Which is correct about deferred tax assets and liabilities?

A. Current deferred tax assets are netted against current deferred tax liabilities.
B. All noncurrent deferred tax assets are netted against noncurrent deferred, tax liabilities.
C. Deferred tax assets and liabilities are never netted.
D. Deferred tax assets are netted against deferred tax liabilities if they relate to the same tax authority.

Answer 12

D. Deferred tax assets are netted against deferred tax liabilities if they relate to the same tax authority.

Question 13

Which is incorrect concerning tax asset and liabilities?

A. Deferred tax asset and liability shall be discounted.
B. Tax asset and liability shall presented separately.
C. Deferred tax asset and liability shall be distinguished from curent tax asset and liability.
D. Deferred tax asset and liability are noncurrent.

Answer 13

A. Deferred tax asset and liability shall be discounted.

Question 14

The entity had temporary differences that will reverse next year and add to taxable income. Deferred taxes based on these temporary differences should be classified as

A. Current asset
B. Noncurrent asset
C. Current liability
D. Noncurrent liability

Answer 14

D. Noncurrent liability

Question 15

A deferred tax liability is computed using

A. Current tax law regardless of enacted future tax law
B. Expected future tax law whether enacted or not
C. Enacted future tax law
D. Either current or expected future tax law

Answer 15

C. Enacted future tax law

Question 16

The purpose of interperiod tax allocation is to

A. Allow entities to utilize carryforward loss.
B. Allow entities whose tax liabilities vary significantly from year to year to smooth tax payments.
C. Recognize an asset or liability for the tax consequences of temporary differences that exist at year-end.
D. Amortize the deferred tax liability.

Answer 16

C. Recognize an asset or liability for the tax consequences of temporary differences that exist at year-end.

Question 17

Intraperiod tax allocation

A. Involves the allocation of income taxes between current and future periods.
B. Associates tax effect with different items in the income statement.
C. Is not generally acceptable.
D. Arises because different income statement items are taxed at different rates.

Answer 17

B. Associates tax effect with different items in the income statement.

Question 18

Which is true about intraperiod tax allocation?

A. Intraperiod tax allocation arises because certain items are recognized for accounting and tax purposes.
B. Intraperiod tax allocation is required for the effect of accounting policy.
C. The purpose is to allocate income tax expense evenly over a number of accounting periods..
D. The purpose is to relate the income tax expense to the items which affect the amount of tax.

Answer 18

D. The purpose is to relate the income tax expense to the items which affect the amount of tax

Question 19

All would require intraperiod tax allocation, except

A. Discontinued operation
B. Prior period error
C. Change in accounting estimate
D. Income from continuing operations

Answer 19

C. Change in accounting estimate

Question 20

Tax expense should be allocated to all, except

A. Discontinued operation
B. Prior period error
C. Gross income
D. Other comprehensive income

Answer 20

C. Gross income