Section 3...Income Taxes

Question 1

Deferred Tax Assets and Liabilities

Answer 1

When book income is less than T.I., you have an Asset (Unearned Rev and Payables)
When book income is more than T.I., you have a Liab (Receivables, Prepaids, Dep)

Question 2

Income Tax Expense

Answer 2

T.I. x’s tax rate

If it’s in the problem, you will also need to add increases in def tax liab and subtract increases in def tax assets.

Question 3

Deferred Income Tax Expense

Answer 3

Take total amount of temporary differences (T.I. - Temporary differences) x’s effective tax rate.

Question 4

Temporary differences

Answer 4

An involuntary gain is a temporary difference