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) accounting
income.
(b)
In a period in which a deductible temporary difference reverses, the reversal
will cause taxable income to be ___________ (less than/greater than) accounting
income.
(c)
If a $76,000 balance in the Future Tax Asset account were calculated using a
40% rate, the underlying temporary difference would amount to $___________.
(d)
Future taxes (are/are not) recorded to account for permanent differences.
(e)
If a taxable temporary difference originates in 2011, it causes taxable income
of 2011 to be ___________ (less than/greater than) accounting income for 2011.
(f)
If total tax expense is $50,000 and future tax expense is $65,000, then the
current portion of the expense is referred to as a current tax ___________ (expense/benefit)
of $___________.
(g)
If a corporation’s 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 “Income tax payable” if the company has made estimated tax payments of
$36,500 for Year 2? $___________
(h)
An increase in the Future Tax Liability account on the balance sheet is
recorded by a ___________ (debit/credit) to the Future Income Tax Expense
account.
(i)
An income statement that reports current tax expense of $82,000 and a future
tax benefit of $23,000 will report total income tax expense of $___________.
(j)
A valuation account may be used whenever it is judged to be more likely than
not that a portion of a future tax asset ___________ (will be/will not be)
realized.
(k)
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 a future tax ___________ (expense/benefit).
(l)
If a company’s income tax rate increases, the effect will be to ___________ (increase/decrease)
the amount of a future tax liability and _______ (increase/decrease) the amount
of a future tax asset.
(m)
The difference between the tax basis of an asset or liability and its carrying
amount is called a ___________ difference. Differences between accounting
income and taxable income that will reverse in the future are called ___________
differences.
(a) Greater than
(b) Less than
(c) 190,000 = ($76,000 divided by 40%)
(d) Are not
(e) Less than
(f) Benefit; $15,000
(g) $3,500 = [($100,000 X 40%) – $36,500]
(h) Debit
(i) $59,000 = ($82,000 – $23,000)
(j) Will not be
(k) Benefit
(l) Increase, increase
(m) Temporary, reversing
