1.
Intraperiod tax allocation
A. Associates tax effect with different items in the income statement.
B. Involves the allocation of income taxes between current and future periods.
C. Arises because different income statement items are taxed at different rates.
D. Arises because certain revenue and expenses appear in the financial statements
either before or after they are included in the income tax return.
2. A deferred tax liability arising from the use of an accelerated method of depreciation
for tax purposes and the straight line method for financial reporting purposes would be
classified as
A. A current liability.
B. A noncurrent liability.
C. An offset to the accumulated depreciation.
D. A current liability for the portion of the temporary difference reversing within a
year and a noncurrent liability for the remainder.
3. Which of the following statements is true?
A. The term "future taxable amount" relates to a deferred tax asset
B. "Future taxable amounts" include revenues and gains that are included in the tax
return before they are recognized for accounting purposes.
C. "Future deductible amounts" include expenses and losses that are included in the
tax return before they are recognized for accounting purposes.
D. Temporary differences occur because accounting standards and income tax laws
differ as to when they recognize assets, liabilities, owners' equity, revenues,
gains, expenses and losses
4. ABC Company's financial reporting basis of its plant assets exceeded the tax basis
because it uses a different method of reporting depreciation for financial reporting
purposes and tax purposes. If there is no other temporary differences, ABC should
report a
A. Current tax asset C. Deferred tax asset
B. Current tax payable D. Deferred tax liability
5. A temporary difference that would result in a deferred tax asset is
A. Accrued warranty expense
B. Accrual commission income
C. Interest revenue on government bonds
D. Excess of tax depreciation over financial accounting depreciation
6. At the current year-end, an entity had a deferred tax liability arising from accelerated
depreciation that exceeded a deferred asset relating to rent received in advance which
is expected to reverse in the next year. Which of the following shall be reported in the
entity's current year-end statement of financial position?
A. The deferred tax liability as a current liability.
B. The deferred tax liability as a noncurrent liability.
C. The excess of the deferred tax liability over the deferred tax asset as a current
liability.
D. The excess of the deferred tax liability over the deferred tax asset as a
noncurrent liability.
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7. Which of the following statements in relation to deferred tax assets or liabilities is true?
I. Deferred tax liabilities are the amounts of income taxes payable in future periods
in respect of taxable temporary differences.
II. Deferred tax assets are the amounts of income taxes recoverable in future
periods in respect of deductible permanent differences.
A. I only C. Both I and II
B. II only D. Neither I nor II
8. An item that would create a permanent difference in pretax financial and taxable
income would be
A. Paying fines for violation of laws.
B. Purchasing equipment previously leased with an operating lease in prior years.
C. Using the percentage of completion method on long-term construction contracts.
D. Using accelerated depreciation for tax purposes and straight line depreciation for
book purposes.
9. A deferred tax liability shall be recognized for all
A. Deductible temporary differences C. Taxable temporary differences
B. Permanent differences D. Temporary differences
10. Under PAS 12, taxable temporary difference is
A. A difference between the carrying amount of an asset or liability and its tax base.
B. A difference between taxable profit and accounting profit that originates in one
period and reverse in one or more subsequent periods.
C. A temporary difference that will result in taxable amounts in the future when the
carrying amount of the asset is recovered or the liability is settled.
D. A temporary difference that will result in amounts that are tax deductible in the
future when the carrying amount of the asset is recovered or the liability is
settled.
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