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Financial Accounting Reporting > Payable and Taxes > Flashcards

Payable and Taxes Flashcards

1
Q

What would create a deferred tax asset?

A

Deferred tax asset is recognized when there is a temporary difference between income under GAAP

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2
Q

What is considered a permanent book to tax difference?

A

permanent difference are never revered. That means there are no deferred tax consequences

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3
Q

Current liabilities includes which obligations?

A

it includes obligations due on demand within one year

Obligations that will be replaced by other current liabilities

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4
Q

What are the requirement by GAAP for accrual vacation pay?

A

the accruals for vacation pay benefits either vest or accumulated and payment is both probable and reasonably estimated

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5
Q

Adjusted balance officers compensation expense for the year Dec 31st year 1?

A

Compensation expense
490,000
Officers Salaries.18,000
Total amount 175,000

= 683,000 Compensation expense for the year

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6
Q

What is a contract liability?

A

examples would be a deposit

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7
Q

When is Revenue Recognized ?

A

When the goods or services are transferring promise to the customer

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8
Q

calc the escrow liability that need to be reported on the balance sheet?

A

you start off with the Part 1

Escrow account liability 700,000
escrow payments received 1,580,000
2,280,000

Real estate taxes paid 1,720,000

                                                     50,000 Add:   escrow funds 	                        5000
                                                     45,000 Escrow Account Liability 	           605,000
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9
Q

How long is the deferred revenue a liability?

A

until the service has been performed

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10
Q

Intraperiod income tax allocation arises because

A

bc items that are included in the determination of taxable income may be presented in different sections of the financial statements

they are used for the following

Discontinued operations
Continued Operations
Other Comprehensive Income
Items debited or credited directly to equity

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11
Q

What is temporary difference?

A

Difference between the carrying amount of an asset and liability in the balance sheet and its tax basis

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12
Q

What will be the result of expense that are recognized in financial income this year and deductible next year?

A

Deferred tax asset

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13
Q

What causes an increase in deferred Tax liabilities?

A

Both rent receivable and prepaid insurance increase deferred income tax liabilities

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14
Q

When deferred tax liabilities arise when temporary differences in book and taxable income what happens to taxable amounts?

A

Future taxable amounts

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15
Q

When deferred tax assets arise when temporary differences in book and taxable income what happens to taxable amounts?

A

future deductible amounts

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16
Q

What causes a temporary diff?

A

the result of GAAP and tax basis of an asset or liability to differ

Also when Revenue and gains & Expenses and losses are used to calc net income in GAAP

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17
Q

Calc the deferred liabilities?

A

to calc the deferred liabilities you need to know the dividends received of 30,000 x enacted rate 30% = 9,000

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18
Q

Calc, the deferred tax asset?

A

When calc the deferred tax asset we need to understand and know that first we are looking for the future deductible amount

In this problem we have received an annual payment of 36,000 x 6 /12 = 18,000

Using the 18,000 x enacted rate 40% = 7,200 deferred tax asset for the year 4

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19
Q

Calc, the deferred income tax liability

A

Financial Statement issued
300,000
600,000
850,000

1,750,000

Tax Returns for the same period

400,000
700,000

1,100,000 1,750,000 - 1,100,000 = 650,000

650,000 x 25% = 162,500

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20
Q

What is recognized as deferred tax asset?

A

An operating loss carryforward is a deferred asset because it results in future deductible amounts

Immediate expensing of organization costs have future deductible so that cause it to have future deductible

Subscription revenue received in advanced is recognized for tax purpose when received but deferred for financial tax purposes

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21
Q

Is receipt of municipal bonds interest deferred tax asset?

A

No because it’s a nontaxable item and that make it a permanent

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22
Q

Adjustment for Revenue differences that are temporary

A

When we subtract revenue when recognized first under the GAAP however not on taxable income bc the tax law doesn’t allow us to recognize it as revenue yet even though we can recognize it under GAAP

When adding revenues the tax law wants to include that GAAP won’t allow it yet.

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23
Q

Calc the deferred income tax liability?

A

Remember to use the enacted tax rates for the calc for deferred income tax liability and asset

So here we use the depreciation exceeded its book depreciation

25,000 x 35% = 8,750

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24
Q

Calc, the effective tax rate?

A

Pretax Accounting Income 200,000
Municipal bonds income (20,000)
Life Insurance premiums 10,000

Taxable Income 190,000

Tax rate 30%

Tax Expense 57,000 / 200,000 pretax net income

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25
Examples of federal income tax liability?
Municipal Bond Interest Tax exempt municipal bond interest Excess of tax depreciation Untaxed life insurance proceeds
26
Calc, the current income tax expense?
we need the taxable income 650,000 income tax rate 30% current income tax expense 195,000
27
Calc, the deferred income tax expense?
by cumulative taxable temporary difference 70,000 x 30% = 21,000 + deferred tax asset 9000 = 30,000 Deferred income tax expense
28
Calc the deferred tax expense in the income statement for the year?
To start off you need to deductible the depreciation expense Part 1: Depreciation Deductibles Tax Return 860,000 Accounting Records 570,000 Difference 290,000 Part 2: Credit Loss deductible Accounting Records 250,000 Tax Return 220,000 Difference 30,000 Difference 290,000 Future Tax Rate 40% Deferred tax liability 116,000 Temporary diff 30,000 Future Tax Rate 40% = 12,000 116,000 - 12,000 = 104,000 Deferred tax expense
29
In the statement of financial position deferred tax liabilities and assets are always classified as non current amounts?
Yes
30
How are deferred taxes classified as non current amounts on the balance sheet?
Noncurrent liability
31
Calc, the sales revenue and sales taxes payable?
To calc the Sales revenue 27,560 / 1.06 state taxes = 26,000 Sales Revenue Step 2 calc the sales tax 27,560 26,000 1,560 Quarterly Sales Tax - 600 previously remitted = 960 Sales Taxes
32
Calc, the deferred tax asset?
Annual rental payment 36,000 x 6 / 12 = 18,000 6/12 is because June 15 year 4 - Dec 31, year 4 So Step 2 is calc 18,000 x enacted rate 40% = 7,200 deferred tax asset
33
The relationship between income tax currently payable and income tax expense is that tax currently payable
may differ from income tax expense
34
Calc, the deferred tax liability at the year end balance sheet?
Reported depreciation 550,000 - 400,000 = 150,000 Year 4 50,000 x 30% = 15,000 Year 5. 50,000 x 25% = 12,500 Year 6 50,000 x 25% = 12,500 = 40,000 deferred income tax liability
35
calc the current tax benefits realized using the depreciation instead of the straight line method?
To start off you need to calc the straight line depreciation Step 1 So first we start off with equipment and calc the depreciation expense using the straight line method 100,000 / 10 useful life = 10,000 Depreciation expense Step 2 We use the equipment cost of 100,000 multiply by 150% and 10% 100,000 x 150% x 10% = 15,000 STRAIGHT LINE RATE Step 3 Here we subtract the depreciation expense and straight line rate 15,000 - 10,000 = 5,000 5000 x 30% = 1,500 depreciation tax purpose
36
Calc, the federal income tax liability on december 31 balance sheet?
Step 1 - calc the current tax expense Pretax account income 800,000 Untaxed gain (350,000) excess of tax depre. 400,000 enacted tax rate 30% Current tax expense 120,000 federal tax paid 70,000 federal income tax liability 50,000
37
calc the interest payable on dec, 31 balance sheet?
given on the problem 100,000 x 12% x 3 / 12 = 3000 given on the problem 75,000 x 10% x 3 /12 = 1875 Total = 4875
38
calc, the amount of loss that should be recognized on the redemption of the bond?
So here we first need to calc the carrying amount since we have both the discounts and premium discounts 500,000 par value x (1-0.98) x 3 /15 = 2000 Bond issued cost 20,000 x 3/15 = 4000 New we can calc the new Carrying amount 500,000 - 2000 - 4000 = 494,000 Step 2 - calc the loss on extinguishment on debt 500,000 x 1.02 premium - 494,000 = 16,000
39
Would revenue or expense result in deferred tax asset for the current year
expense causes a future deductible and where deferred asset is created
40
Would revenue or expense result in deferred liability for the current year?
Revenues recognized in the financial income this year and taxable next year
41
Under current generally accepted accounting principles which approach is used determine income tax
asset and liability approach
42
calc, the income tax expense
permanent difference doesn't cause a change deferred asset or liability however, on deferred tax expense 280,000 taxable income x 30% = 84,000
43
Calc, the stamp redemptions for dec 31, Y4?
Step 1 - The redemption cost 2,250,000 x 80% only were sold to license = 1,800,000 Step 2 - Liability for the redemption 6,000,000 + 1,800.000 - Cost of stamp 2,750,000 = 5,050,000 stamp redemptions
44
Deferred revenues recorded by a company that provides services to customers?
deferred revenues is a liability until the service has been performed
45
Calc, the deferred income tax liability of the gain?
Usually there are no gain on taxable items but the tax basis of the asset is reduced by the amount of unrecognized gain 450,000 - 300,000 = 150,000 x enacted rate 30% = 45,000 deferred income tax liability
46
calc, the deferred liability that needs to be reported on the balance sheet?
Reported depreciation 550,000 - 400,000 = 150,000 Y4 50,000 x 30% = 15,000 Y5 50,000 x 25% = 12,500 Y5 50,000 x 25% = 12,500 40,000
47
When there is a tax law change when would that change be reported for an example for September 15, Year 4 interim statement?
the tax law changed would be reported on the next enactment date so that would be September 30th Year 4
48
Calc, the deduction of the bonus and income tax?
360,000 / 1.0 - .4 tax rate 360,000 / 0.60 = 600,000 600,000 10% = 60,000 bonus
49
Calc, accrued liability for unemployment claims?
Acme had 5 employees x 10,000 eligible wages x 2% = 1,000
50
Calc, deferred tax asset west should report on the balance sheet?
36,000 annual rental payment x 6 / 12 = 18,000 18,000 x 40% = 7,200 deferred tax asset
51
Calc, the accrued salaries payable?
40,000 Salaries paid 390,000 420,000 expense = 70,000 12/31/YR2
52
Intraperiod income tax allocation arises because
items included in the determination of taxable income may be presented in different sections of the financial statements
53
The relationship between income tax currently payable and income tax expense is that income tax currently payable
may be differ from income tax expense
54
Usually associated with payable classified as accounts payable
Periodic payment of interest (NO) Secured by collateral (NO)
55
How are coupon transactions recorded?
As unearned revenue
55
Calc, the deferred income tax liability?
12,000 taxable amounts x 25% rate applicable = 3,000
55
Calc, the deferred income tax liability Dec 31, Year 3?
Depreciation reported of 550,000 - 400,000 = 150,000 / 3 Year 4 50,000 x 30% = 15,000 Year 5 50,000 x 25% = 12,500 Year 6 50,000 x 25% = 12,500 = 40,000 deferred income tax liability
56
Calc, the accrued salaries payable?
Remember that accrued salaries payable is when the company owes money to their employee for work Salaries Payable Credit 40,000 accrued salaries payable Credit 420,000 salaries expense during the year Debit 390,000 Salaries payable 40,000 + 390,000 - 420,000 = 70,000 accrued salaries payable
57
How is deferred Revenue affected when the gift cerfificates are sold?
It would decrease Redemption of certificates & Lapse of certificates are both decrease Since there is no performance obligation there is no deferred revenue which decreases deferred revenue
58
Calc, the current year financial statements?
800,000 retail sales x 5% = 40,000 4500 + 40,000 = 44500 - 39500 = 5000 sales tax payable
59
The relationship between income tax currently payable and income expense is that income tax currently payable
may differ from income tax expense
60
Calc, the income tax expense reported on the income statement ?
Remember we need to calc the current portion and deferred portion as well for tax expense
61
Calc, the income tax expense reported on the income statement?
To calc, the income tax expense we need to start off with the following Pretax - 5,000,000 Municipal bonds - (600,000) Gain on land -(1,000,000) 3,400,000 Tax rate x 40% Current tax exp 1,360,000 Next we need to calc the deferred portion bc the gain on land will cause a taxable income in the future 1,000,000 x 40% = 400,000 1,360,000 + 400,000 = 1,760,000 income statement
62
Calc, the deferred income tax liability for the long term construction contracts?
Step 1 - add all the Completed contracts for Y3-Y4 400,000 + 700,000 = 1,100,000 TAX RETURN Step 2 - add all the percentage of completion Y3,Y4,Y5 300,000 + 600,000 + 850,000 = 1,750,000 1,750,000 - 1,100,000 = 650,000 X 25% = 162,500 Deferred tax liability
63
Calc, the net income after bonus while the income tax was 360,000?
To start off we need to first calculate the following 360,000 / (1-0.40) = 600,000 600,000 x 10% = 60,000
64
What is the primary objective of accounting for income taxes?
to see how much is need to be paid by tax payers and refunded to them as well. Also, Deferred tax liability and assets for the future tax sequences of events recoginzied in the financial statements
65
Calc, the sales tax payable for the sale?
Step 1 - Calc the sales tax of the sale retail sale 8,000,000 x 5% collected state sales tax = 40,000 Step 2 - begin sales tax balance 4,500 + 40,000 from sales - 39,500 from state sales tax mention on problem = 5,000 sales tax payable
66
Calc, the deferred revenue for the gift certificates redeemable for merchandise that expire 1 year after their issurance?
For Year 2 Sales 500,000 x 10% = 50,000 Unredeemed at 12/31 150,000 - 50,000 = 100,000 report deferred
67
Calc, income tax expense?
Taxable income for current year 120,000 x 35% = 42,000 current deferred income tax liability begin of year 55,000 - 50,000 deferred income tax liability end of year = 5,000 Deferred income tax asset begin of the year 10,000 - 16,000 deferred income tax asset end of year = 6,000 42,000 + 5000 deferred income tax - deferred income tax asset 6000 = 41,000 income tax expense
68
deferred revenue is recognized when performance obligation transferring a promised good and service to a customer (When this happens deferred revenue is increased) Service revenue is NOT increased
69
what causes deferred tax asset not to be recognized?
receipt of municipal bond interest
70
Long term obligations that are callable by the creditor because of the violation of provision of the debt agreement at the balance sheet should be classified by

Financial Accounting Reporting (25 decks)

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