Income Tax

Question 1

Payroll FICA taxes

Answer 1

This payroll taxes paid by employees are not employer’s taxes.
The employee’s share, however, should be accrued as a withholding tax

Question 2

Under GAAP which approach is used to determine income tax expense?

Answer 2

The asset and liabilty approach

Question 3

Intraperiod income tax allocation and interperiod

Answer 3

GAAP required the income tax expense for the period should be allocated among :
1.- Continued operations
2.- discontinued operations
3.- OCI
4.- Change in accounting principle
Intraperiod allocation of taxes to one period will NOT result in DTA or DTL

Question 4

THE primary objective of accounting for income taxes

Answer 4

1.- Recognize the current amount of taxes payable or refundable
2.- DTL or DTA. When they are recognized in the FS or tax return according to the events that derived from

Question 5

FS prepared under GAAP or the income tax basis

Answer 5

Recognized certain revenues and expenses in different periods

Question 6

Temporary differences arise when expenses are deductible for tax purposes

Answer 6

1.- After They Are
Recognized in
Financial Income
2.- Before They Are
Recognized in
Financial Income

Question 7

Temporary Difference
among two types of depreciation

Answer 7

The difference between the tax basis and the carrying amount of a depreciable asset is a temporary difference.

Question 8

Increase in deferred income tax liabilities on cash-basis taxpayer

Answer 8

When a cash basis taxpayer prepares accrual FS. Expenses like prepaid expenses and warranty obligations.
This temporary difference also will result in future taxable amounts when the asset is recovered. (DTA)

Question 9

Valuation allowance

Answer 9

A valuation allowance account is establish when certain portion of DTA , based on the weight of the available evidence, it is more likely than not that some portion will not be realized.
If there sufficient taxable income to cover fuuture deductible income the valuation account is not needed it

Question 10

DTA

Answer 10

An expense recognized in financial income this year and deductible next year. It is measured using the enacted tax rate and enacted tax law.

Question 11

DTL

Answer 11

Expenses deductible in the current year and recognized in financial income next year