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Chapter 19: 1ISTQ (page 1113)

Which of the following is false? (a) Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates. (b) Under IFRS, all potential liabilities must be recognized. (c) Under GAAP, the enacted tax rate is used to measure deferred tax assets and liabilities. (d) Under IFRS, all deferred tax assets and liabilities are classified as non-current.

Short Answer

Expert verified

Non-current liabilities are those business liabilities that expire more than one year. These liabilities are long term loans and advances and are reported under the balance sheet.

Step by step solution

01

Option (a) Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates is the correct answer.

Option a is the correct answer.

02

Reason

As per the GAAP, i.e., Generally Accepted Accounting Principles, the amount of deferred taxes is reported under the liability section of the organization's balance sheet. Deferred tax arises due to the difference in the amount of income tax because of tax laws and the accounting reporting methods used by the firm.

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Most popular questions from this chapter

Jennifer Capriati Corp. has a deferred tax asset account with a balance of \(150,000 at the end of 2016 due to a single cumulative temporary difference of \)375,000. At the end of 2017, this same temporary difference has increased to a cumulative amount of \(450,000. Taxable income for 2017 is \)820,000. The tax rate is 40% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2016. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized. (b) Assuming that it is more likely than not that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2017 to record the valuation account.

How are deferred tax assets and deferred tax liabilities reported on the statement of financial position under IFRS?

What are the two objectives of accounting for income taxes?

Beilman Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2015 $120,000 40% 2016 90,000 40 2017 (280,000) 45 2018 120,000 45 The tax rates listed were all enacted by the beginning of 2015.Instructions (a) Prepare the journal entries for years 2015鈥�2018 to record income tax expense (benefit) and income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carryforward will not be realized. (b) Prepare the income tax section of the 2017 income statement beginning with the line 鈥淥perating loss before income taxes.鈥� (c) Prepare the income tax section of the 2018 income statement beginning with the line 鈥淚ncome before income taxes.鈥�

South Carolina Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of \(55,000 in 2018, \)60,000 in 2019, and \(65,000 in 2020. South Carolina鈥檚 pretax financial income for 2017 is \)300,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2017. Instructions (a) Compute taxable income and income taxes payable for 2017. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (c) Prepare the income tax expense section of the income statement for 2017, beginning with the line 鈥淚ncome before income taxes.鈥�
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