Question 1

Only U.S.corporations are included in a combined GAAP financial statement.

Accepted Answer

A) True 
 B)False

Question 2

South, Inc., earns book net income before tax of $400,000 in year 1.South acquires a depreciable asset in year 1, and first year tax depreciation exceeds book depreciation by $50,000.At the end of year 1, South's deferred tax liability account balance is $17,500.In year 2, South earns $500,000 book net income before tax, and its book depreciation exceeds tax depreciation by $20,000.South records no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%, what is South's total income tax expense reported on its GAAP financial statements for year 2?

Accepted Answer

A)  $7,000
B)  $168,000
C)  $175,000
D)  $182,000E) A) and B)
F) All of the above

Question 3

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

Accepted Answer

A)  The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
B)  An analysis of earnings before interest, taxes, depreciation, and amortization (EBITD
A)   is often a better approach to comparing operating results of two companies.
C)  One-time effects within a company's effective tax rate should be removed before comparing effective tax rates across companies (or across years for the same company) .
D)  All the above observations are correct.E) C) and D)
F) B) and D)

Question 5

A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year GAAP financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Phyllis, Inc., earns book net income before tax of $600,000.Phyllis puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000.Phyllis has recorded no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%, what is Phyllis's total income tax expense reported on its GAAP financial statements?

Accepted Answer

A)  $252,000
B)  $210,000
C)  $168,000
D)  $42,000E) B) and C)
F) B) and D)

Question 7

Repatriating prior year earnings from a foreign subsidiary located in a low-tax country where ASC 740-30 (APB 23) benefits were previously adopted will decrease a corporation's current year effective tax rate.

Accepted Answer

A) True 
 B)False

Question 8

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following items are not included in the GAAP financial statement income tax footnote's effective tax rate reconciliation?

Accepted Answer

A)  Hypothetical tax on book income at U.S.Federal corporate tax rate.
B)  Total tax expense per the GAAP financial statements.
C)  Tax effect of temporary differences.
D)  Tax effect of permanent differences.E) C) and D)
F) A) and B)

Question 10

Purple, Inc., a domestic corporation, owns 80% of Blue, Ltd., a foreign corporation and Yellow, Inc., a domestic corporation.Purple also owns 50% of Green, Inc., a domestic corporation.Purple receives no distributions from any of these corporations.Which of these entities' net income are included in Purple's Federal tax return for the current year assuming Purple elects to include all eligible entities in its consolidated Federal income tax return?

Accepted Answer

A)  Purple, Blue, Yellow, and Green.
B)  Purple, Blue, and Yellow.
C)  Purple, Blue, and Green.
D)  Purple and Yellow.E) A) and B)
F) A) and C)

Question 11

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal income tax return?

Accepted Answer

A)  Federal income taxes.
B)  Foreign income taxes.
C)  State income taxes.
D)  All the above taxes are included.E) A) and B)
F) A) and C)

Question 12

A valuation allowance reflects uncertainty that the taxpayer will be able to recover a deferred tax asset.

Accepted Answer

A) True 
 B)False

Exam 3: Taxation on the Financial Statements

A valuation allowance reflects uncertainty that the taxpayer will be able to recover a deferred tax asset.

Correct Answer
verified

Only U.S.corporations are included in a combined GAAP financial statement.

Correct Answer
verified

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

Correct Answer
verified

Correct Answer
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Correct Answer
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Repatriating prior year earnings from a foreign subsidiary located in a low-tax country where ASC 740-30 (APB 23) benefits were previously adopted will decrease a corporation's current year effective tax rate.

Correct Answer
verified

A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year GAAP financial statements.

Correct Answer
verified

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

Correct Answer
verified

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal income tax return?

Correct Answer
verified

Correct Answer
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Which of the following items are not included in the GAAP financial statement income tax footnote's effective tax rate reconciliation?

Correct Answer
verified

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

Correct Answer
verified

Exam 3: Taxation on the Financial Statements

A valuation allowance reflects uncertainty that the taxpayer will be able to recover a deferred tax asset.

Correct AnswerverifiedShow Answer

Only U.S.corporations are included in a combined GAAP financial statement.

Correct AnswerverifiedShow Answer

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Repatriating prior year earnings from a foreign subsidiary located in a low-tax country where ASC 740-30 (APB 23) benefits were previously adopted will decrease a corporation's current year effective tax rate.

Correct AnswerverifiedShow Answer

A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year GAAP financial statements.

Correct AnswerverifiedShow Answer

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

Correct AnswerverifiedShow Answer

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal income tax return?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following items are not included in the GAAP financial statement income tax footnote's effective tax rate reconciliation?

Correct AnswerverifiedShow Answer

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

Correct AnswerverifiedShow Answer

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