Question

1.

Which item is recognized for tax purposes but not financial reporting purposes?

Select one:

a. Fines resulting from violation of laws

b. Depletion in excess of cost

c. Proceeds from life insurance on officers

d. Premiums paid for life insurance on officers

2.  

When the temporary difference due to accelerated tax depreciation is reversing, which of the following accounts will be credited in the journal entry for accruing income taxes? Assume no other differences exist.

Select one:

a. Both Deferred Tax Liability and Income Tax Payable

b. Deferred Tax Asset, but not Income Tax Expense

c. Income Tax Payable, but not Deferred Tax Asset

d. Income Tax Expense, but not Deferred Tax Liability

3.  

For which of the following items might a valuation account be used for the deferred tax item if income is doubtful in future years?

Select one:

a. Net Operating Loss Carryforward, but not Unearned Revenue

b. Unearned Revenue, but not Net Operating Loss Carryforward

c. Both Unearned Revenue and Net Operating Loss Carryforward

d. Neither Unearned Revenue nor Net Operating Loss Carryforward

4.  

A $90 temporary difference existed for the Orland Company, caused by accelerated tax depreciation on 12/31/24. The difference will reverse evenly over the next three years. Tax Rates are 10% in 2024, 20% in 2025, and 30% in 2026 and beyond. Pretax book income in 2024 is $1,000.

What is 12/31/24 Income Tax Payable?

Select one:

a. $115

b. $91

c. $97

d. $100

e. $99.82

Answer 1

1. Which item is recognized for tax purposes but not financial reporting purposes?

c. Proceeds from life insurance on officers.

2. When the temporary difference due to accelerated tax depreciation is reversing, which of the following accounts will be credited in the journal entry for accruing income taxes? Assume no other differences exist.

d. Income Tax Expense, but not Deferred Tax Liability.

3. For which of the following items might a valuation account be used for the deferred tax item if income is doubtful in future years?

b. Unearned Revenue, but not Net Operating Loss Carryforward.

Answer 4

Option c. $97