FIN 3400 CHAPTER 14--TAXES ON THE FINANCIAL STATEMENTS

CHAPTER 14--TAXES ON THE FINANCIAL STATEMENTSCHAPTER 14--TAXES ON THE FINANCIAL STATEMENTS Student: ___________________________________________________________________________ 1. If a corporation has no subsidiaries outside the U.S., its book and taxable income are identical. True False 2. Only U.S. corporations are included in a combined GAAP financial statement. True False 3. Foreign entities owned at least 80% by the parent are included in a consolidated group’s U.S. tax return. True False 4. Giant uses the “equity method” to account for the operations of its 40% owned subsidiary Little. A portion of Little’s profits for the year are included in Giant’s GAAP book income. True False 5. The operations of 80% or more owned domestic subsidiaries can be included in the parent corporation’s consolidated tax return, if a proper election is made. True False 6. Yahr, Inc., is a domestic corporation with no subsidiaries. It operates in almost every U.S. state. Yahr records no permanent or temporary book-tax differences this year. Yahr’s tax expense on its GAAP financial statements and its tax liability reported on its Federal income tax return are identical. True False 7. “Temporary differences” are book-tax income differences that eventually appear in both the financial statements and the income tax return, but not in the same reporting period. True False FIN 3400 8. Schedule UTP of the Form 1120 reconciles financial statement net income after tax with a large corporation’s taxable income. True False 9. “Permanent differences” include items that appear in the Federal income tax return as income or deduction, and in the GAAP financial statements as revenue or expense, but in different reporting periods. True False 10. In general, the purpose of ASC 740 (SFAS 109) is to compute and disclose the actual taxes paid by a business entity to state, local, Federal, and foreign governments for the current year. True False 11. The current tax expense reported on the GAAP financial statement generally represents the taxes actually payable to domestic or foreign governmental authorities. True False 12. A deferred tax liability represents a potential future tax benefit associated with income reported in the current year GAAP financial statements. True False 13. A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year GAAP financial statements. True False 14. A deferred tax asset is the expected future tax benefit (savings) associated with income reported in the current year GAAP financial statements. True False 15. A deferred tax asset is the current tax benefit (savings) associated with income or expense to be reported in future year GAAP financial statements. True False CONTINUES...