Acctg331 Exam 3 Practice Questions And Correct Revised Answers.

Accounting for income taxes can result in the reporting of deferred taxes as - Answer a non current liability Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if - Answer the future tax rates have been enacted into law. A valuation account is used to: - Answer reduce a deferred tax asset. Deferred income taxes are based on the: - Answer future tax rates if they have been enacted into law. Income tax expense is based on: - Answer pretax income "When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be" - Answer reported as an adjustment to income tax expense in the period of change. Taxable income is a tax accounting term and is also referred to as income before taxes. - Answer false "At December 31, Year 17 Blossom Corporation reported a deferred tax liability of $175000 which was attributable to a taxable temporary difference of $670000. The temporary difference is scheduled to reverse in Year 21. During Year 18, a new tax law increased the corporate tax rate from 30% to 35%. Blossom should record this change by debiting" - Answer Income Tax Expense for $33500. $670,000 * (35%-30%) = $33,500 Which of the following is NOT a way that deferred taxes affect the financial statements? - Answer They change the calculation of total current assets on the balance sheet. Which of the following book-tax differences will lead to a deferred tax asset? - Answer Receiving cash now for two years of rent. OR Recognizing warranty expense under GAAP before honoring the warranty.