Toa Quizzer 3

  TOA QUIZZER 3Multiple Choice  Identify the choice that best completes the statement or answers the question.  ____1. Which entities are required to apply deferred tax accounting?I. Public entities II. Nonpublic enttes a. I only c. Both I and II  b. II only d. Neither I nor II ____2. I is he excess of axable revenue over axdeductble expenses and exemptons for he yearas dened by he Bureau of Inernal Revenue. a. Taxable incoe c.  !ccounting incoe sub ect to tax  b.  !ccounting incoe per boo# d. $oprehensi%e incoe ____&. I is he ne pro for a period before deductng ax expense. a.  !ccounting profit c. 'ross profit  b. Taxable profit d. Net profit  ____4. This is a difference bet(een the tax basis of an asset or liabilityand its carrying aount that (ill result in taxable or deductibleaounts in the future years (hen the carrying aount of theasset or liability is reco%ered or settled.I. Teporary difference II. Permanen dierence a. I only c. Both I and II  b. II only d. Neither I nor II  ____5. Taxable teporary difference is theI. Teporary difference that (ill result in future taxable aountin deterining taxable incoe of future periods (hen thecarrying aount of the asset or liability is reco%ered or settled. II. emporary dierence ha !ill resul in fuuredeductble amoun in deermining axableincome of fuure periods !hen he carryingamoun of he asse or liabiliy is recovered orse led. a. Both I and II c. II only  b. I only d. Neither I nor II ____). I is he deferred ax conse#uence a ribuable o a axable emporary dierence. a. *eferred tax liability c. $urrent tax liability  b. *eferred tax asset d. $urrent tax asset ____+. I is he deferred ax conse#uence a ribuable oa deductble emporary dierence and operatngloss carryfor!ard. a. *eferred tax liability c. $urrent tax liability  b. *eferred tax asset d. $urrent tax asset,. I is he amoun of income ax paid or payable forhe year as deermined in applying he provisionsof he enaced ax la! o he axable income. a. $urrent tax expense c. *eferred tax benefit  b. *eferred tax expense d. Incoe tax expense-. he deferred ax expense is e#ual o a. Increase in deferred tax asset less the increase in deferred tax liability.  b. Increase in deferred tax liability inus the increase in deferred tax asset. c. Increase in deferred tax asset. d. Increase in deferred tax liability./. I is he aggregae amoun included in he deerminaton of ne pro for he period in respec of curren ax and deferred ax. a. Tax expense c. *eferred tax expense  b. $urrent tax expense d. *eferred tax benefit. I is he amoun a ribuable o an asse or liabiliyfor ax purposes. a. $arrying aount c. 0easureent base  b. Tax base d. Taxable aount2. $ deferred ax liabiliy shall be recogni%ed for all a. Peranent differences c. Taxable teporary differences  b. Teporary differences d. *eductible teporary differences &. $ deferred ax asse shall be recogni%ed for alldeductble emporary dierences and operatngloss carryfor!ard !hen a. It is probable that taxable incoe (ill be a%ailable against(hich the deferred tax asset can be used  b. It is probable that accounting incoe (ill be a%ailableagainst (hich the deferred tax asset can be used c. It is possible that taxable incoe (ill be a%ailable against(hich the deferred tax asset can be used d. It is possible that accounting incoe (ill be a%ailableagainst (hich the deferred tax asset can be used1.Which stateent is incorrect  concerning ax asses andliabilites& a. *eferred tax assets and liabilities shall be discounted.  b. Tax assets and liabilities shall presented separately froother assets and liabilities in the stateent of financialposition. c. *eferred tax assets and liabilities shall be distinguishedfro current tax assets and liabilities. d. When an entity a#es a distinction bet(een current andnoncurrent assets and liabilities it shall not classifydeferred tax assets and liabilities as current.   ____15.  !n entity shall offset a deferred tax asset and deferred taxliability (henI. The deferred tax asset and deferred tax liability relate toincoe taxes le%ied by the sae taxing authority. II. he enty has a legal enforceable righ oose a curren ax asse agains a curren axliabiliy. a. I only c. Both I and II  b. II only d. Neither I nor II  ____16. The follo(ing stateents relate to deferred tax assets or liabilities. Which stateent is true ?I. *eferred tax liabilities are the aounts of incoe taxespayable in future periods in respect of taxable teporarydifferences.II. *eferred tax assets are the aounts of incoe taxesreco%erable in future periods in respect of deductible permanent  dierences. a. I only c. Both I and II  b. II only d. Neither I nor II ____+. 'eferred ax asses are he amoun of incomeaxes recoverable in fuure periods in respec of  a. The carryfor(ard of unused tax losses only  b. Taxable teporary differences and carryfor(ard of unusedtax losses c. *eductible teporary differences and carryfor(ard of unused tax losses d. Peranent differences ____,.!ll of the follo(ing ust be disclosed separately except & a. The tax bases of a or ites on (hich deferred tax hasbeen calculated.  b. The aount of deductible teporary differences for (hichno deferred tax asset is recogni3ed. c. The aount of taxable teporary differences associated(ith in%estents in subsidiaries and associates for (hichno deferred tax liability is recogni3ed. d. The aount of incoe tax relating to each coponent of other coprehensi%e incoe.  ____19. The follo(ing stateents relate to classification of ites under P!4 2. Which stateent is true ?I. Interest expense accrued but included in taxable profit on acash basis shall be classified under deductible teporarydifferences. II. (here accumulaed depreciaton on an asse isgreaer han accumulaed ax depreciaton)he amoun shall be classied underdeductble emporary dierences. a. I only c. Both I and II  b. II only d. Neither I nor II  ____20. Which stateent is true  in accordance (ith P!4 2?I. *e%elopent costs ha%e been capitali3ed and (ill be aorti3ed but (ere deducted in deterining taxable profit in the period in (hich they (ere incurred. This (ill gi%e rise to a deferred tax asset. II. he ax base for a machine for ax purposes is greaer han he carrying amoun in he nancial saemens up o he end reportng period. his !ill give rise o a deferred ax asse. a. I only c. Both I and II  b. II only d. Neither I nor II2. *ustcaton for he mehod of deerminingperiodic deferred ax expense is based on heconcep of a. 0atching of periodic expense to periodic re%enue.  b. 5b ecti%ity in the calculation of periodic expense. c. 6ecognition of assets and liabilities. d. $onsistency of tax expense easureent (ith actual tax planning strategies.22. (hich of he follo!ing dierences !ould resul infuure axable amoun& a. 7xpenses or losses that are deductible after they arerecogni3ed in accounting incoe.  b. 6e%enues or gains that are taxable before they arerecogni3ed in accounting incoe. c. 7xpenses or losses that are deductible before they arerecogni3ed in accounting incoe. d. 6e%enues or gains that are recogni3ed in accountingincoe but are ne%er included in taxable incoe.2&. $ emporary dierence !hich !ould resul in a deferred ax liabiliy is a. Interest re%enue on unicipal bonds.  b.  !ccrual of (arranty expense. c. 7xcess of tax depreciation o%er accounting depreciation. d. 4ubscription recei%ed in ad%ance.21. $ emporary dierence !hich !ould resul in adeferred ax asse is a. Tax penalty or surcharge  b. *i%idend recei%ed on share in%estent c. 7xcess tax depreciation o%er accounting depreciation d. 6ent recei%ed in ad%ance included in taxable incoe at thetie of receipt but deferred for accounting purposes 25.  !n entity cash basis taxpayer prepares accrual basis financialstateents. In its year8end stateent of financial position theentity9s deferred incoe tax liabilities increased copared tothe prior year. Which of the follo(ing changes (ould cause thisincrease in deferred tax liabilities?I. !n increase in prepaid insuranceII. !n increase in rent recei%able III. $n increase in !arrany obligaton a. I only c. II and III  b. I and II d. III only   ____2). $n enty repored deferred ax asses anddeferred ax liabilites a he end of he prior yearand a he end of he curren year. +or he currenyear) he enty should repor deferred income axexpense or bene e#ual o he a. *ecrease in the deferred tax assets  b. Increase in the deferred tax liabilities c.  !ount of the current liability plus the su of the netchanges in deferred tax assets and deferred tax liabilities d. 4u of the net changes in deferred tax assets and deferredtax liabilities ____2+. Because an enty uses dieren mehods odepreciae e#uipmen for accountng and incomeax purposes) he enty has emporary dierencesha !ill reverse during he nex year and add oaxable income. 'eferred income axes ha arebased on hese emporary dierences shall beclassied in he enty,s saemen of nancialpositon as a. $ontra account to current assets  b. $ontra account to noncurrent assets c. $urrent liability d. Noncurrent liability ____2,. $ he mos recen year-end) an enty had adeferred ax liabiliy arising from acceleraeddepreciaton ha exceeded a deferred asserelatng o ren received in advance !hich isexpeced o reverse in he nex year. (hich of hefollo!ing shall be repored in he enty,s mosrecen year-end saemen of nancial positon& a. The excess of the deferred tax liability o%er the deferred taxasset as a noncurrent liability.  b. The excess of the deferred tax liability o%er the deferred taxasset as a current liability. c. The deferred tax liability as a noncurrent liability. d. The deferred tax liability as a current liability. ____2-. $n enty,s nancial reportng basis of is planasses exceeded he ax basis because i uses adieren mehod of reportng depreciaton fornancial reportng purposes and ax purposes. If ihas no oher emporary dierences) he entyshall repor a a. $urrent tax asset c. *eferred tax liability  b. *eferred tax asset d. $urrent tax payable ____&/. $ deferred ax liabiliy is compued using a. $urrent tax la( regardless of expected or enacted future tax la(.  b. 7xpected future tax la( regardless of (hether enacted or not. c. $urrent tax la( unless a future enacted tax la( is different. d. 7ither current or expected future tax la( regardless of (hether the expected future tax la( is enacted or not.&.The purpose of interperiod  ax allocaton is o a.  !llo( reporting entities to fully utili3e tax losses carriedfor(ard fro a pre%ious year.  b.  !llo( reporting entities (hose tax liabilities %arysignificantly fro year to year to sooth payents to taxingagencies. c. 6ecogni3e an asset or liability for the tax consequences of teporary differences that exist at the end of the reportingperiod. d.  !orti3e the deferred tax liability sho(n in the stateent of financial position.&2.The result of interperiod  ax allocaton is ha a. Wide fluctuations in an entity9s tax liability payents areeliinated.  b. Tax expense sho(n in the incoe stateent is equal to thedeferred taxes sho(n in the stateent of financial position. c. Tax liability sho(n in the stateent of financial position isequal to the taxes sho(n in the pre%ious year9s stateentof financial position plus the incoe tax expense sho(n inthe incoe stateent. d. Tax expense sho(n in the incoe stateent is equal toincoe taxes payable for the current year plus or inus thechange in the deferred tax asset or liability balances for theyear.&&.Which of the follo(ing is an exaple of a teporary difference that (ould result in a deferred tax liability & a. :se of straight line depreciation for accounting purposes and an accelerated rate for incoe tax purposes.  b. 6ent re%enue collected in ad%ance (hen included in taxable incoe before it is included in pretax accounting incoe. c. :se of a shorter depreciation period for accounting purposes than is used for incoe tax purposes. d. In%estent losses recogni3ed earlier for accounting purposes than for tax purposes.&1.Which of the follo(ing is the ost li#ely ite to result in a deferred tax asset & a. :sing accelerated depreciation for tax purposes but straight line depreciation for accounting purposes  b. :sing the cost reco%ery re%enue ethod of recogni3ing construction re%enue for tax purposes but using percentageof copletion ethod for financial reporting purposes c. Prepaid expense d. :nearned re%enue&;. $n example of a deductble emporarydierence/ occurs !hen a. The installent sales ethod is used for tax purposes butthe accrual ethod of recogni3ing sales re%enue is usedfor financial accounting purposes.  b.  !ccelerated depreciation is used for tax puposes butstraight line depreciation is used for accounting purposes. c. Warranty expenses are recogni3ed on the accrual basis for financial accounting purposes but recogni3ed for taxpurposes as the (arranty conditions are et.  d. The cost reco%ery ethod of recogni3ing constructionre%enue is used for tax purposes but the percentage of copletion ethod is used for financial accountingpurposes. ____&). $ deferred ax liabiliy arising from he use of anacceleraed mehod of depreciaton for axpurposes and he sraigh line mehod fornancial reportng purposes !ould be classied inhe saemen of nancial positon as a.  ! current liability  b.  ! noncurrent liability c.  ! current liability for the portion of the teporary differencere%ersing (ithin a year and a noncurrent liability for thereainder  d.  !n offset to the accuulated depreciation reported in thestateent of financial position ____&+. $n iem ha !ould creae a permanen dierencein preax nancial income and axable income!ould be a. :sing accelerated depreciation for tax purposes andstraight line depreciation for boo# purposes.  b. Purchasing equipent pre%iously leased (ith an operatinglease in prior years. c. :sing the percentage of copletion ethod on long8terconstruction contracts. d. Paying fines for %iolation of la(s. ____&,. Recogni%ing ax bene in a loss year due o a loss carryfor!ard re#uires a. 5nly a footnote disclosure.  b. $reating a ne( carryfor(ard for the next year. c. $reating a deferred tax asset. d. $reating a deferred tax liability. ____&-.  Intraperiod ax allocaton a. In%ol%es the allocation of incoe taxes bet(een current and future periods.  b.  !ssociates tax effect (ith different ites in the incoe stateent. c.  !rises because certain re%enue and expenses appear in the financial stateents either before or after they are included in the incoe tax return. d.  !rises because different incoe stateent ites are taxed at different rates. ____1/. In computng he change in deferred ax asse or liabiliy) !hich ax rae is used& a. $urrent tax rate c. 7nacted future tax rate  b. 7stiated future tax rate d. Prior tax rate  ____41.It is an existing liability of uncertain timing or uncertain amount.a.Provisionc.ccrued liability b.!ontingent liabilityd. ote #ayable42. #rovision s$all be recogni%ed as liability &$en 'c$oose t$e incorrect  one(a.n entity $as a #resent obligation as a result of a #ast event. b.It is #robable t$at an outflo& of resources embodying economic  benefits &ill be rec)uired to settle t$e obligation.c.It is #ossible t$at an outflo& of resources embodying economic  benefits &ill be re)uired to settle t$e obligation.d.*$e amount of t$e obligation can be measured reliably.4+. constructive obligation is an obligationI. rising from contract, legislation or o#eration of la&.II. *$at is derived from an entity-s action t$at t$e entity &ill acce#t certain res#onsibilities because of #ast #ractice, #ublis$ed  #olicy or current statement and as a result, t$e entity $as createda valid ex#ectation in ot$er #arties t$at it &ill disc$arge t$ose res#onsibilities.a.I onlyc.ot$ I and II b.II onlyd. eit$er I nor II44.It is an event t$at creates a legal or constructive obligation because t$e entity $as no ot$er realistic alternative but to settle t$e obligation.a./bligating eventc.ubse)uent event b.Past eventd.!urrent event45.n outflo& of resources embodying economic benefits is regarded as #robable &$ena.*$e #robability t$at t$e event &ill occur is greater t$an t$e  #robability t$at t$e event &ill not occur. b.*$e #robability t$at t$e event &ill not occur is greater t$an t$e  #robability t$at t$e event &ill occur.c.*$e #robability t$at t$e event &ill occur is t$e same as t$e  #robability t$at t$e event &ill not occur.d.*$e #robability t$at t$e event &ill occur is 903 liely.46.$ere t$ere is a continuous range of #ossible outcomes, and eac$  #oint in t$at range is as liely as any ot$er, t$e range to be used is t$ea.inimum b.aximumc.id#ointd.ummation of t$e minimum and maximum47.$ere t$e #rovision being measured involves a large #o#ulation of items, t$e obligation is estimated by &eig$ting all #ossible outcomes by t$eir associated #robabilities. *$e name for t$is statistical met$od of estimation isa.8x#ected valuec.!urrent value b.Present valued.8xtra#olation4.$ic$ statement is incorrect in t$e measurement of a #rovision:a.*$e riss and uncertainties t$at inevitably surround many events and circumtances s$all be taen into account in reac$ing t$e best estimate of a #rovision. b.$ere te effect of t$e time value of money is material, t$e amount of a #rovision s$all be t$e #resent value of t$e ex#enditure ex#ected to settle t$e obligation.c.;uture events t$at may affect t$e amount re)uired to settle t$e