ACCT 405 Accounting for Income Tax
questions with correct answers.
How do we calculate tax payable? ANS - Based on the IRS Code
Howw do we calculate tax expense? ANS - Based on GAAP
temporary difference ANS - difference between pretax accounting income and taxable income and,
consequently, between the reported amount of an asset or liability in the financial statements and its
tax basis which will "reverse" in later years.
What happens when accounting income is greater than taxable income ANS - Future taxable amounts
and Deferred Tax Liability
What happens when accounting income is less than taxable income ANS - Future deductible amounts
and Deferred Tax Asset
JE for Income tax Expense ANS - Debit INcome Tax Expense
Credit Income Tax Payable
Debit or Credit Deferred Tax Asset or Liability
Steps for Recording Income tax ANS - Step One: Calculate Tax Payable (Multiply Tax income by current
tax rate)
Step Two: Calculate Ending DTA's and DTL's
Step 3: Calculate change in DTA's and DTL's
Step 4: Plug Tax Expense
questions with correct answers.
How do we calculate tax payable? ANS - Based on the IRS Code
Howw do we calculate tax expense? ANS - Based on GAAP
temporary difference ANS - difference between pretax accounting income and taxable income and,
consequently, between the reported amount of an asset or liability in the financial statements and its
tax basis which will "reverse" in later years.
What happens when accounting income is greater than taxable income ANS - Future taxable amounts
and Deferred Tax Liability
What happens when accounting income is less than taxable income ANS - Future deductible amounts
and Deferred Tax Asset
JE for Income tax Expense ANS - Debit INcome Tax Expense
Credit Income Tax Payable
Debit or Credit Deferred Tax Asset or Liability
Steps for Recording Income tax ANS - Step One: Calculate Tax Payable (Multiply Tax income by current
tax rate)
Step Two: Calculate Ending DTA's and DTL's
Step 3: Calculate change in DTA's and DTL's
Step 4: Plug Tax Expense
