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TU A3512 Ch. 19: Accounting for Income Taxes Concept Qs !. ". !a#an$ra C%A

1. Explain &a's to $efer ITax () impro*e cash f#o&+ & &h' ? Whats go*ernment response,

2. Explain %retax -inancia# Income (%-I ) vs. Taxa #e Income (TI ) & ru#es &h' the' $iffer

3. What is a Temporar' tax $ifference & explain a taxa #e vs. $e$ucti #e difference:

/. Pi Co. Rev is $2 ! & Exps are $" ! each #r % to %% not incl din' deprec. on e ip ent *o 'ht %+%+% for $, ! -ith /#r sef l life. Pi ses 0+1 for 0s & 334 for 5ax. or each

of the #rs calc late Pis %-I & TI & prepare "0s for income taxes at a 3 tax rate :2 1 2 11 2 12 Tota#

5. Re/do these "0s -ith the sa e facts except ass e that Pi uses 4 for I ) 67 for Tax

8. 6o- -o ld acco nts fro each set of 7Es(89 & 8") a*ove *e reporte$ in the 2 1 - s ?

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. When is a eferre$ Tax Asset red ced *# a *a#uation a##o&ance acco nt?

. tu$' each item of 2 ;riginating Temporar' ifferences (T : %g 1153 e*enue or ?ains that are taxa #e on -112 efore the' are recogni@e$ on I :

1+ %repai$ >e*(>entD u scriptionsD etc+: Taxa #e &hen recei*e$ *s &hen earne$ for I .2+ a#es ) 7ease acEs: Taxa #e imme$iate#' *s $eferre$ for I .

4+ 0xpenses or 7osses that are recogni@e$ on I efore eing $e$ucte$ on -112 : 1+ Farrant' ) 4a$ e t 0xpsD estimate$ (matching+ for I *s cash pai$ for Tax. 2+ 7itigation ) iscontinue$ ;peration 7ossesD accrue$ for I *s cash asis for Tax. 3+ tocE option compensation: accrue$ $uring *esting for I D !%=0% at exercise for Tax

9. What is a %ermanent Tax ifference vs. a Temporar' 5ax 3ifference?

1 . tu$' each item of 2 %ermanent ifference t'pes (%g 115/ ):I. >e* ) 0xp items inc#u$e$ in I %-I ut ne*er in -112 TI GI>Cs reason for exc#usionH:

1+ Interest recei*e$ on municipa#(state)#oca# go*+ on$s Ghe#p state ) #oca# go*ernmentsH.

2+ 0xpenses incurre$ to o tain muni on$ interest Gif muni int. not taxe$D exps not $e$.H

3+ 7ife insurance recei*e$ ' Co. on insure$ emp#o'ee $eath G#iEe non

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II. e$uctions for -112 TI that are ne*er I %-I expenses GI>Cs reason for $e$uctionH: 1+ ep#etionJ of certain natura# resources in excess of cost Gto promote miningH. 2+ e$uction for $i*s ( D or 1 + recei*e$ et&een U corps Ga*oi$s trip#e taxationH.

11. 4io Co. P is $2 ! each #r % to %% incl din': %) $%;! install ent sale accr ed in & 2) $"! life ins rance pre i s paid in %% & %

What t'pe of $ifference is the install ent sale & life ins rance pre i s & calc lateTaxa #e Income & prepare "0s re'ardin' inco e taxes ( at 3 rate ) for each of the #ears

Insta##ment sa#e: Taxa #e Temporar' $ifference maEing %-I = TI ) a $eferre$ tax #ia .7ife Insurance %remiums: %ermanent $ifferenceB I expense ut ne*er a TI $e$uction. ( ee %g 1155 + 2 1 2 11 2 12 Tota#s

12. Explain statutor' & margina# vs effecti*e tax rate> se the a*ove #ears a*ove as exa ple:

13. 0earch R0 -e*site ( www.irs.gov ) & find 2 1 Corporate (-orm 112 + Tax>ate ch :

1/. Pi Co. 2 % P $2 ! & 5 $2%"!> -hat is -orm 112 tax & margina# vs effecti*e rate

15. What are 4ios (8%% facts) actua# /#ear tax "0s sin' actua# 2 1 Corporate Tax >ates

http://www.irs.gov/http://www.irs.gov/

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2 1 2 11 2 12 Tota#s

18. 6o- is IT0xp calc lated if expected f t re rates (@0+state+forei'n) $iffer fro c rrent rate?

1 . Whats an A K;7 B> ho- is it treated for 5axes & -hats the RC purpose for this treat ent?

1 . Explain genera# ru#e treatment for D1s vs. the a#ternate treament e#ection allo-a*le:

19. Wh# -o ld a Co. ever a!e the e#ection & pass p imme$iate refun$s fro the past 2 #rs?

2 . Pi Co. has these P s(no te p. or per . differences) & ass ed flat tax rates (%gs 1159 +: Lear %-I ) TI >ate -112 Tax Lear %-I ) TI >ate -112 Tax

2 8 M 5 D 25 M12D5 2 9 (M 5 D + 25 n6a 2 M 1 D 3 M3 D 2 1 M 25 D / ,

2 M 2 D / M D 2 11 M 3 D /2 , Record Pis < , tax "0s (no D1 election) deter ine their 9 I Ket 7oss & fill in A?sB:

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21. Record Pis < , tax "0 if theK;7 e#ection is ma$e & deter ine their 9 I Ket 7oss :

22. Whats the pro*le -ith a *a#uation a##o&ance acct for a TA (fro te p. diffs or C+ s)?

23. 6o- sho ld a 35 or 351 acco nt *e classified in the 0?

2/. What is intraperio$ tax a##ocation vs. interperio$ tax allocation?

25. When st a %2+ % #r/end Co. fi#e its 2 % -112 & can it -ait ntil then to pa# its tax?

28. What is Tax epreciation called & -hat are the genera# r les for ost deprecia*le assets?

>e*ie& %age 118/ . !etho$ ) %roce$ures for >eporting eferre$ Income TaxesB )>e*ie& the Comprehensi*e Interperio$ Tax A##ocation %ro #em in the Appen$ix .