MC.Ch.19 - Practice MC for Chapter 19 Page 1 CHAPTER 19...

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Practice MC for Chapter 19 Page 1 CHAPTER 19 ACCOUNTING FOR INCOME TAXES MULTIPLE CHOICE—Conceptual 22 Taxable income of a corporation differs from pretax financial income because of Permanent Temporary Differences Differences a. No No b. No Yes c. Yes Yes d. Yes No 25. A temporary difference arises when a revenue item is reported for tax purposes in a period After it is reported Before it is reported in financial income in financial income a. Yes Yes b. Yes No c. No Yes d. No No 28. A major distinction between temporary and permanent differences is a. permanent differences are not representative of acceptable accounting practice. b. temporary differences occur frequently, whereas permanent differences occur only once. c. once an item is determined to be a temporary difference, it maintains that status; however, a permanent difference can change in status with the passage of time. d. temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse. 31. Which of the following differences would result in future taxable amounts? a. Expenses or losses that are tax deductible after they are recognized in financial income. b. Revenues or gains that are taxable before they are recognized in financial income. c. Revenues or gains that are recognized in financial income but are never included in taxable income. d. Expenses or losses that are tax deductible before they are recognized in financial income. 38. Which of the following is not considered a permanent difference? a. Interest received on municipal bonds. b. Fines resulting from violating the law. c. Premiums paid for life insurance on a company’s CEO when the company is the beneficiary. d. Stock-based compensation expense.
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Practice MC for Chapter 19 Page 2 41. Recognition of tax benefits in the loss year due to a loss carryforward requires a. the establishment of a deferred tax liability. b. the establishment of a deferred tax asset. c. the establishment of an income tax refund receivable. d. only a note to the financial statements. 42. Recognizing a valuation allowance for a deferred tax asset requires that a company a. consider all positive and negative information in determining the need for a valuation allowance. b. consider only the positive information in determining the need for a valuation allowance. c. take an aggressive approach in its tax planning. d. pass a recognition threshold, after assuming that it will be audited by taxing authorities. Multiple Choice Answers—Conceptual Item Ans. Item Ans. Item Ans. 22. c 28. d 41. b 25. a 31. d 42. a MULTIPLE CHOICE—Computational 54. Lehman Corporation purchased a machine on January 2, 2009, for $2,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS
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This note was uploaded on 02/08/2011 for the course ACCT 3512 taught by Professor Sullivan during the Spring '09 term at Temple.

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MC.Ch.19 - Practice MC for Chapter 19 Page 1 CHAPTER 19...

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