ACCT 328- accounting for income taxes(with Errorless
answers)
BTD correct answers difference between financial reporting versus reporting for income tax
why would BTD arrise correct answers companies use the full accrual method to report revenue,
but for tax purposes they use a modified cash basis
what are the respective objecectives of GAAP and the internal revenue code (IRC) correct
answers uniformity of financial reporting vs. generating taxable revenue
implications of BTD correct answers pre tax "book" income (PTBI) =/ taxable income
GAAP book values of assets and liabilities =/ tax (IRC) basis
objectives of GAAP for income taxes correct answers 1- recognize amt of taxes payable (or
refundable) for the current period
2- recognize the future tax consequences of transaction already recognized in financial
statements or tax returns
- deferred tax liabilities and asset
temporary differences correct answers - differences between the book value and the tax basis of
any asset or liability that will result in either taxable or deductible amts in future years
* they cause DTA's and DTL's
- are reversible
* i.e. if they cause taxable income to be higher than pre- tax book income (PTBI) in an early
year, they will cause TI to be lower than PTBI in a later year
deferred tax assets and liabilities correct answers - represent the future tax effects of temporary
differences between the book value and tax basis of assets and liabilities
deductible temporary correct answers temporary differences will decrease TI relative to PTBI in
the future
- deductible TEMP create deferred tax assets
taxable temporary correct answers will increase TI relative to PTBI in the future
- taxable TEMP create deferred tax liabilities
deferred tax asset valuation allowance (DTAVA) correct answers - DTA should be reduced by
the valuation allowance account if there is a greater than 50% change that some or all of its
future economic benefit will not be realized
- sometime called " more than likely than not" test
- DTAVA is a contra asset
- DTAVA should be re- evaluated each year
answers)
BTD correct answers difference between financial reporting versus reporting for income tax
why would BTD arrise correct answers companies use the full accrual method to report revenue,
but for tax purposes they use a modified cash basis
what are the respective objecectives of GAAP and the internal revenue code (IRC) correct
answers uniformity of financial reporting vs. generating taxable revenue
implications of BTD correct answers pre tax "book" income (PTBI) =/ taxable income
GAAP book values of assets and liabilities =/ tax (IRC) basis
objectives of GAAP for income taxes correct answers 1- recognize amt of taxes payable (or
refundable) for the current period
2- recognize the future tax consequences of transaction already recognized in financial
statements or tax returns
- deferred tax liabilities and asset
temporary differences correct answers - differences between the book value and the tax basis of
any asset or liability that will result in either taxable or deductible amts in future years
* they cause DTA's and DTL's
- are reversible
* i.e. if they cause taxable income to be higher than pre- tax book income (PTBI) in an early
year, they will cause TI to be lower than PTBI in a later year
deferred tax assets and liabilities correct answers - represent the future tax effects of temporary
differences between the book value and tax basis of assets and liabilities
deductible temporary correct answers temporary differences will decrease TI relative to PTBI in
the future
- deductible TEMP create deferred tax assets
taxable temporary correct answers will increase TI relative to PTBI in the future
- taxable TEMP create deferred tax liabilities
deferred tax asset valuation allowance (DTAVA) correct answers - DTA should be reduced by
the valuation allowance account if there is a greater than 50% change that some or all of its
future economic benefit will not be realized
- sometime called " more than likely than not" test
- DTAVA is a contra asset
- DTAVA should be re- evaluated each year
