Chapter 16 ACG 4111 Exam Questions And Answers 100% Pass.
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Course
ACG 4111
Institution
ACG 4111
Chapter 16 ACG 4111 Exam Questions And
Answers 100% Pass.
Deferred tax liability - answerIf tax laws allow a company to postpone paying taxes on
activities reported in the current period's income statement, the company must report a deferred
tax liability because the company anticipates those a...
Chapter 16 ACG 4111 Exam Questions And
Answers 100% Pass.
Deferred tax liability - answer✔If tax laws allow a company to postpone paying taxes on
activities reported in the current period's income statement, the company must report a deferred
tax liability because the company anticipates those activities will lead to future taxable amounts.
deferred tax asset - answer✔if tax laws require the company to pay more tax than is indicated by
the activities reported in the current period's income statement, the company reports a deferred
tax asset reflecting the benefit of future deductible amounts
what does tax expense include - answer✔Each year's tax expense reported in the income
statement includes not only a current portion related to tax payable in the current year but also a
deferred portion that includes any changes in deferred tax assets and liabilities.
examples of deferred tax liabilities - answer✔-installment sales
-unrealized gain from recording investments at fair value
-accelerated depreciation
-prepaid expenses
examples of deferred tax assets - answer✔-estimated expenses and losses
-unrealized loss from recording investments at FV
-rent collected in advance
-subscriptions collected in advance
-other revenue collected in advance
At the beginning of 2021, Wyatt Company purchased equipment for $800. The equipment has a
four year useful life and Wyatt uses straight line depreciation method. Under the tax laws Wyatt
is able to fully depreciate the equipment for tax purposes in the year of purchase. Wyatt has a tax
rate of 25%. As a result of this transaction, Wyatt's tax expense journal entry in 2021 would
include a:
a.Debit to deferred tax liability for $600
b.Credit to deferred tax liability for $600
c.Debit to deferred tax liability for $150
d.Credit to deferred tax liability for $150 - answer✔a.Credit to deferred tax liability for $150
Windsor Company started 2021 with a deferred tax liability of $150. As of the end of the period,
Windsor identifies future taxable amounts of $800. Windsor has a tax rate of 25%, and calculates
that taxes payable will be $120. Windsor's tax expense journal entry will include a:
a.Debit to tax expense for $200
b.Debit to tax expense for $170
c.Debit to tax expense for $50
d.Credit to tax for $30 - answer✔a.Debit to tax expense for $170
how can deferred tax assets and liabilities be computed from temporary book-tax differences -
answer✔calculated by multiplying the temporary book-tax difference by the applicable tax rate
Hardy Welders Inc. had purchased a machine at the beginning of year 1 for $2,000,000. The
machine has a useful life of 10 years and a book value of $1,800,000 at the beginning of year 2.
Hardy depreciates the machine on a straight line basis for financial reporting purposes but fully
depreciates it on the date of purchase for tax purposes. Hardy pays taxes at a rate of 25%.
Hardy's year 2 balance sheet should include a deferred tax liability of:
a.$1,600,000
b.$400,000
c.$0
d.Insufficient information to answer - answer✔b 400000
Shortly before the end of 2021, Colter Company makes an installment sale that generates $400 of
before-tax income. Colter recognizes income for accounting purposes when the sale is made, but
will recognize income for tax purposes when cash is subsequently collected in 2022. Colter has a
tax rate of 25%. As a result of this transaction, Colter's tax expense journal entry would include
a:
a.Debit to deferred tax liability for $400
b.Credit to deferred tax liability for $400
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