Income taxes

Question 1

What effective tax rate is used for a tax year at the end of each interim period?

Answer 1

The estimated effective tax rate for the year.

Expected = Estimated

Question 2

What does permanent differences between taxable income and pre-tax accounting income affect?

Answer 2

Permanent differences affect the current reconciliation of book income to taxable income.

Permanent differences have no effect on the computation of deferred taxes.

Permanent differences have not affect on either interperiod or intraperiod income tax allocation.

Question 3

Where do deferred tax benefits come about from?

Answer 3

Temporary differences like depreciation and warranty costs

Question 4

What kind of deferred tax is provided when tax depreciation is higher/more/in excess of book depreciation?

Answer 4

A deferred tax liability

Question 5

What is intraperiod tax allocation?

Answer 5

The apportionment of the income tax expense for the current accounting period (as determined by application of the liability method to achieve interperiod tax allocation) among the components of the income statement.

Question 6

What portions of operating income are subject to the application of intraperiod income tax allocation?

Answer 6

• discontinued operations
• cumulative effects of accounting changes
• prior-period adjustments
• direct adjustments to capital accounts