Interperiod Tax Allocation

Question 1

If future enacted tax rates are not the same as the current rate and future temporary differences originated in the current period, which rate(s) do(es) income tax expense reflect?

Answer 1

Both current and future enacted tax rates are reflected.

Question 2

What effect does an originating deductible difference have on the tax accrual entry?

Answer 2

Increases the required ending deferred tax asset balance

Question 3

How is the change in the deferred tax liability account for a period expressed?

Answer 3

Required ending deferred tax liability balance less beginning deferred tax liability balance

Question 4

If more than one tax bracket and tax rate applies, what rate is used to determine the change in deferred tax accounts?

Answer 4

Average future enacted tax rate is used to determine the change in deferred tax accounts.

Question 5

How is the required ending deferred tax liability balance expressed?

Answer 5

Product of sum of future taxable differences and the future enacted tax rate

Question 6

What is the general formula for computing income tax expense?

Answer 6

Income tax liability plus or minus the change in the deferred tax accounts

Question 7

What tax rate is used for computing the tax liability?

Answer 7

Current tax rate

Question 8

What effect does a reversing taxable difference have on the tax accrual entry?

Answer 8

Decreases the required ending deferred tax liability balance