【正文】 sheet. Deferred ine tax expense is defined as the difference in ine tax expense and taxes payable. Each individual deferred item is expected to be paid (or recovered) in future years. Question ID: 24691 Which of the following statements about tax deferrals is FALSE? 3 A. Taxes payable are determined by pretax ine and the tax rate. B. Ine tax paid can include payments or refunds for other years. C. Tax deferrals are created due to the difference in financial and tax accounting. D. A deferred tax liability is expected to result in future cash outflow. A Taxes payable are the taxes due to the government and are determined by taxable ine and the tax rate. Note that pretax ine is ine before tax expense and is used for financial reporting. Taxable ine is the ine based upon IRS rules that determines taxes due and is used for tax reporting. Question ID: 14962 It is CORRECT to say that deferred taxes: A. are not found on the liability side of the balance sheet. B. result from permanent differences between taxable and reported earnings. C. will decrease only when a cash payment is made. D. arising from depreciation of a particular asset will ultimately reduce to zero as the item is depreciation. D Question ID: 14971 Accelerated depreciation results in: A. lower taxes in the early years that are not reversed in the future. B. higher taxes in the early years that are then reversed in the future. C. higher taxes in the early years that are not reversed in the future. 4 D. lower taxes in the early years that are then reversed in the future. D Question ID: 14968 The following information is regarding as asset a firm purchased for $100,000. ? The asset has a 5year useful life and no salvage value. ? The asset generates $30,000 of annual revenue for 5years ? Tax rate is 35 percent. ? The business depreciates the asset over 4 years on a straightline basis. Taxes payable in year 5 are? A. $5250. B. $1750. C. $10500. D. $8750. B $30,000 revenue $25,000 depreciation = $5,000 ine ($5,000 ine)(.35 tax rate) = $1750 taxes payable Question ID: 24695 The difference in taxable ine and pretax ine can result in a deferred tax: A. liability if pretax ine is less than taxable ine. B. asset or liability if the difference will not reverse in future years. C. asset or liability if the difference will reverse in future years. D. asset if pretax ine is more than taxable ine. 5 C If taxable ine (on tax returns) is less than the pretax ine (on financial statements) and the cause of this difference will reverse in the future, then a deferred tax liability is created. If taxable ine is more than pretax ine and the difference will reverse in future years, then a deferred tax asset is created. Question ID: 14967 When firms are deferring their tax liability what type of depreciation is present? A. Straight line. B. Depleted. C. Illegal. D. Accelerated. D Question ID: 24698 Under SFAS 109, which of the following factors can be a reason for a decrease in deferred tax liabilities? A. An increase in the tax rate. B. A decrease in the tax rate and an increase in deferred tax assets. . C. A decrease in the tax rate. D. An increase in deferred tax assets. C Under SFAS 109, deferred tax liabilities and assets are adjusted to reflect changes in tax rates. The deferred tax liability will decrease when the tax rate has decreased. It can also reduce when the temporary difference between taxable and pretax ine is reversed. 6 Question ID: 24696 A major difference between the deferral method and the liability method is the: A. deferral method is affected by changes in tax rates while the liability method is unaffected by changes in tax rates. B. treatment of changes in tax rates. C. treatment of increases in tax rates. D. treatment of decreases in tax rates. B The major difference between the deferral method and the liability method is the treatment of changes in the tax rates. The deferral method uses current tax rates with no adjustment for tax rate changes while the liability method adjusts deferred tax assets and liabilities to reflect the new tax rates. Question ID: 24697 Which of the following statements about the liability method of accounting for deferred taxes is FALSE? A. Taxes payable is calculated by multiplying the pretax ine by the current tax rate. B. The focus of the liability method is the balance sheet. C. Deferred tax assets and liabilities result from the calculation of deferred tax expense. D. The estimates of future tax liability are changed if the tax rate is changed. C Differences in taxable and pretax ines that will reverse in future years result in deferred tax assets and liabilities, not the calculation on deferred tax expense. The focus of the liability method is the balance sheet, as deferred tax assets and liabilities are calculated directly。s ine tax expense for 1998 is: A. $0. B. $70. C. $50. D. $60. D [$150()] Setup Text: A pany purchased a new pizza oven directly from Italy for $12,676. It will work for 5 years and has no salvage value. The tax rate is 41 percent, and annual revenues are constant at $7,192. For financial reporting, the straightline depreciation method is used, but for tax 18 purposes depreciation is accelerated to 35 percent in years 1 and 2, and percent in year 3. For purposes of this exercise ignore all expenses other than depreciation. Question ID: 24682 What is the tax payable for year one? A. $1,626. B. $1,130. C. $779. D. $1,909. B Tax payable for year 1 will be $1,130 = [{$7,192 ($12,676 x .35)} x .41] Question ID: 24682 What is the deferred tax liability as of the end of year one? A. $1,129 B. $1,90