Income Taxes (F6:M5-6) Flashcards
if the book basis of an asset is greater than its tax basis, does that create a DTA or DTL?
would create a deferred tax liability because more depression is being deducted for tax purposes now, so there will be less to deduct in the future
when there are no temporary differences and no deferred taxes, how is income tax expense calculated?
taxable income x tax rate
what is the formula for effective tax rate?
income tax exp / pretax income
when there are temporary/permanent differences, what is income tax expense- current portion equal to?
income tax payable which is taxable income x tax rate
*remember that ITE- current portion and YE ITP will not equal if estimated tax payments were made during the year
beginning with pretax income, how is taxable income calculated?
pretax income \+ DTA - DTL \+/- permentant differences = taxable income
the deduction for business interest expense is limited to the sum of…
business interest income plus 30% of adjusted taxable income
are DTA and DTL considered current or non-current?
non-current
when preparing interim FS, income tax expense is estimated each quarter using which tax rate?
the effective tax rate expected to apply to the entire year
if you have a DTA and DTL how are they recorded in the balance sheet?
they must be netted so either a DTA or DTL are presented as non-current
an NOL can be carried forward indefinitely, but is limited to what % of taxable income?
80% of taxable income (calculated without regard to the NOL deduction)
what is the journal entry to record an NOL in the year of the operating loss?
DTA (d)
Income tax benefit (c)
when determining what amount should be recognized as a tax benefit, the amount that has more than what % cumulative probability of occurring should be recognized.
50% “more likely than not”
