ACC 312 Exam 3 (93
QUESTIONS AND
ANSWERS)
Temporary differences arise when revenues are
taxable
After they are recognized in financial income /
Before they are recognized in financial income
No / Yes
No / No
Yes / Yes
Yes / No - answer Yes / Yes
Which of the following should be disclosed in a
company's financial statements related to deferred
taxes?
I.The types and amounts of existing temporary
differences.
,II.The types and amounts of existing permanent
differences.
III.The nature and amount of each type of
operating loss and tax credit carryforward.
II and III only.
I and III only.
I, II, and III.
I and II only. - answer I and III only.
Pretax financial income is determined according to
the Internal Revenue Code.
True
False - answer False
A deferred tax liability is the deferred tax
consequence attributable to taxable temporary
differences.
True
False - answer True
Future deductible amounts will cause:
a decrease in pretax financial income in future
years.
,the recording of a deferred tax asset.
taxable income to be more than pretax financial
income in the future.
the recording of a deferred tax liability. - answer
the recording of a deferred tax asset.
Income tax expense is computed as income tax
payable:
less a decrease in a deferred tax asset.
plus or minus the change in deferred income taxes.
plus or minus the change in provision for income
taxes.
less an increase in a deferred tax liability. - answer
plus or minus the change in deferred income taxes.
All of the following are examples of temporary
differences that
result in taxable amounts in future years except:
investments accounted for under the equity
method.
installment sales.
subscriptions received in advance.
, long-term construction contracts (percentage-of-
completion). - answer subscriptions received in
advance.
Tax rates other than the current tax rate may be
used to calculate the deferred income tax amount
on the balance sheet if
it appears likely that a future tax rate will be less
than the current tax rate.
the future tax rates have been enacted into law.
it appears likely that a future tax rate will be
greater than the current tax rate.
it is probable that a future tax rate change will
occur. - answer the future tax rates have been
enacted into law.
A net operating loss (NOL) occurs for tax purposes
in a year when tax-deductible expenses exceed
taxable revenues. Companies can reduce future
taxable income on the amount of NOL in the
following way:
must always be carried forward 20 years.
may carry the net operating loss forward
indefinitely.
QUESTIONS AND
ANSWERS)
Temporary differences arise when revenues are
taxable
After they are recognized in financial income /
Before they are recognized in financial income
No / Yes
No / No
Yes / Yes
Yes / No - answer Yes / Yes
Which of the following should be disclosed in a
company's financial statements related to deferred
taxes?
I.The types and amounts of existing temporary
differences.
,II.The types and amounts of existing permanent
differences.
III.The nature and amount of each type of
operating loss and tax credit carryforward.
II and III only.
I and III only.
I, II, and III.
I and II only. - answer I and III only.
Pretax financial income is determined according to
the Internal Revenue Code.
True
False - answer False
A deferred tax liability is the deferred tax
consequence attributable to taxable temporary
differences.
True
False - answer True
Future deductible amounts will cause:
a decrease in pretax financial income in future
years.
,the recording of a deferred tax asset.
taxable income to be more than pretax financial
income in the future.
the recording of a deferred tax liability. - answer
the recording of a deferred tax asset.
Income tax expense is computed as income tax
payable:
less a decrease in a deferred tax asset.
plus or minus the change in deferred income taxes.
plus or minus the change in provision for income
taxes.
less an increase in a deferred tax liability. - answer
plus or minus the change in deferred income taxes.
All of the following are examples of temporary
differences that
result in taxable amounts in future years except:
investments accounted for under the equity
method.
installment sales.
subscriptions received in advance.
, long-term construction contracts (percentage-of-
completion). - answer subscriptions received in
advance.
Tax rates other than the current tax rate may be
used to calculate the deferred income tax amount
on the balance sheet if
it appears likely that a future tax rate will be less
than the current tax rate.
the future tax rates have been enacted into law.
it appears likely that a future tax rate will be
greater than the current tax rate.
it is probable that a future tax rate change will
occur. - answer the future tax rates have been
enacted into law.
A net operating loss (NOL) occurs for tax purposes
in a year when tax-deductible expenses exceed
taxable revenues. Companies can reduce future
taxable income on the amount of NOL in the
following way:
must always be carried forward 20 years.
may carry the net operating loss forward
indefinitely.
