/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none}

91影视

Log out

Learning Materials

Features

Discover

Chapter 19: Q1CE (page 1109)

Question: Access the glossary (鈥淢aster Glossary鈥�) to answer the following.

(a) What is a deferred tax asset?

(b) What is taxable income?

(c) What is the definition of valuation allowance?

(d) What is a deferred tax liability?

Short Answer

Expert verified

Answer:

(a) Deferred tax assets: It means the deduction in the company's future tax liability.

(b) Taxable income: The income accounted for calculating the assessee's tax liability.

(c) Valuation allowance: The amount which reduces the deferred tax assets.

(d) Deferred tax liability: The company needs to pay more tax in the future.

Step by step solution

01

Meaning of Taxes

Taxes means the mandatory contribution to the government. It is a financial charge imposed by the government on the income of the people. Tax can be classified as direct tax and indirect tax.

02

Deferred tax assets

Deferred tax assets are the asset created when the taxable income ismore than the accounting income. It is a future deduction in the tax liability of the company.

03

Taxable Income

Taxable income means the portion of the income charged to the income tax, and taxable income is according to the guidelines of the internal revenue code.

04

Valuation allowance

The valuation allowance is the allowance the companies use to offset the amount of deferred tax asset balance of the company. It is based on the tax asset, which will not likely realize the tax benefits.

05

Deferred tax Liability

The Deferred tax liability is created when the current year's taxable income is less than the company's accounting income. It is adjusted in the future by increasing the future tax amount.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Under IFRS: (a) 鈥減robable鈥� is defined as a level of likelihood of at least slightly more than 60%. (b) a company should reduce a deferred tax asset when it is likely that some or all of it will not be realized by using a valuation allowance. (c) a company considers only positive evidence when determining whether to recognize a deferred tax asset. (d) deferred tax assets must be evaluated at the end of each accounting period.

Kleckner Company started operations in 2013. Although it has grown steadily, the company reported accumulated operating losses of \(450,000 in its first four years in business. In the most recent year (2017), Kleckner appears to have turned the corner and reported modest taxable income of \)30,000. In addition to a deferred tax asset related to its net operating loss, Kleckner has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation.

Given its past operating results, Kleckner has established a full valuation allowance for its deferred tax assets. However, given its improved performance, Kleckner management wonders whether the company can now reduce or eliminate the valuation allowance. They would like you to conduct some research on the accounting for its valuation allowance.

Instructions

If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses.

  1. Briefly explain to Kleckner management the importance of future taxable income as it relates to the valuation allowance for deferred tax assets.
  2. What are the sources of income that may be relied upon to remove the need for a valuation allowance?
  3. What are tax-planning strategies? From the information provided, does it appear that Kleckner could employ a tax planning strategy to support reducing its valuation allowance?

At the end of 2016, Lucretia McEvil Company has \(180,000 of cumulative temporary differences that will result in reporting the following future taxable amounts. 2017 \) 60,000 2018 50,000 2019 40,000 2020 30,000 \(180,000Tax rates enacted as of the beginning of 2015 are: 2015 and 2016 40% 2017 and 2018 30% 2019 and later 25% McEvil鈥檚 taxable income for 2016 is \)320,000. Taxable income is expected in all future years. Instructions (a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there were no deferred taxes at the end of 2015. (b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2015.

The pretax financial income (or loss) figures for Jenny Spangler Company are as follows:

2012- $160,000

2013- 250,000

2014- 80,000

2015- 160,000

2016- 380,000

2017- 120,000

2018- 100,000

Pretax financial income (or loss) and taxable income (loss) were the same for all the given years. Assume a 45% tax rate for 2012 and 2013, and a 40% tax rate for the remaining years. Instructions (a) Prepare the journal entries for the years 2014 to 2018 to record the income tax expense and effects of the net operating loss carrybacks and carryforwards assuming Jenny Spangler Company using the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)

Instructions Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income. (b) If a \(76,000 balance in Deferred Tax Asset was computed by use of a 40% rate, the underlying cumulative temporary difference amounts to \)_______. (c) Deferred taxes ________ (are, are not) recorded to account for permanent differences. (d) If a taxable temporary difference originates in 2017, it will cause taxable income for 2017 to be ________ (less than, greater than) pretax financial income for 2017. (e) If total tax expense is \(50,000 and deferred tax expense is \)65,000, then the current portion of the expense computation is referred to as current tax _______ (expense, benefit) of \(_______. (f) If a corporation鈥檚 tax return shows taxable income of \)100,000 for Year 2 and a tax rate of 40%, how much will appear on the December 31, Year 2, balance sheet for 鈥淚ncome taxes payable鈥� if the company has made estimated tax payments of \(36,500 for Year 2? \)________. (g) An increase in the Deferred Tax Liability account on the balance sheet is recorded by a _______ (debit, credit) to the Income Tax Expense account. (h) An income statement that reports current tax expense of \(82,000 and deferred tax benefit of \)23,000 will report total income tax expense of \(________. (i) A valuation account is needed whenever it is judged to be _______ that a portion of a deferred tax asset _______ (will be, will not be) realized. (j) If the tax return shows total taxes due for the period of \)75,000 but the income statement shows total income tax expense of \(55,000, the difference of \)20,000 is referred to as deferred tax _______ (expense, benefit).
See all solutions

Recommended explanations on Business Studies Textbooks

Strategy

Read Explanation

Accounting

Read Explanation

Financial Performance

Read Explanation

Corporate Finance

Read Explanation

Human 91影视

Read Explanation

Business Data Analytics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.