ACC 302 PPT 16

ACC 302 PPT 16 - 1 Income Taxes Learning Objectives...

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1 Income  Income  Taxes Taxes
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2 Understand the concept of deferred taxes and the distinction between permanent and temporary differences. Compute the amount of deferred tax liabilities and assets. Explain the provisions of tax loss carrybacks and carryforwards, and be able to account for these provisions. Learning Objectives
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3 Schedule future tax rates, and determine the effect on tax assets and liabilities. Determine appropriate financial statement presentation and disclosure associated with deferred tax assets and liabilities. Comply with income tax disclosure requirements associated with the statement of cash flows. Learning Objectives
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4 Learning Objectives Describe how, with respect to deferred income taxes, international accounting standards have converged toward the U.S. treatment. EXPANDED MATERIALS Perform intraperiod tax allocation.
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5 Deferred Tax Liabilities Defined : Income taxes expected to be paid on future taxable amounts resulting from temporary differences between financial and taxable income.
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6 Deferred Tax Liabilities Examples Revenues (or gains) taxable after they are recognized for financial reporting, such as receivables from installment sales. Expenses (or losses) deductible for tax purposes before they are recognized for financial reporting purposes, such as accelerated tax depreciation.
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7 Deferred Tax Assets Defined : An expected benefit in the form of tax savings on future deductible amounts resulting from deductible temporary differences between financial and taxable income.
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8 Examples Expenses (or losses) that are deductible for tax purposes after they are recognized for financial reporting purposes, such as warranty expenses. Revenues (or gains) that are taxable before they are recognized for financial reporting purposes, such as subscriptions received in advance. Deferred Tax Assets
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9 Permanent and Temporary Differences Permanent Differences : Nondeductible expenses or nontaxable revenues that are recognized for financial reporting purposes but are never part of taxable income. Temporary Differences : Differences between pretax financial income and taxable income arising from business events that are recognized for both financial and tax purposes, but in different
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10 Illustration of Permanent and Temporary Differences For the year ended December 31, 2002, Monroe Corporation reported net income before taxes of $420,000. This amount includes $20,000 of nontaxable revenues and $5,000 of nondeductible expenses. The depreciation method used for tax purposes allowed a deduction that exceeded the book approach by $30,000.
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11 Illustration of Permanent and Temporary Differences Pretax income from income statement $420,000 Add (deduct) permanent differences:
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ACC 302 PPT 16 - 1 Income Taxes Learning Objectives...

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