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What is the deferred tax liability at the end of 2014?
What is the deferred tax liability at the end of 2014?
What is the tax rate used to calculate the deferred tax liability?
What is the tax rate used to calculate the deferred tax liability?
How much was the current tax expense for 2014?
How much was the current tax expense for 2014?
What is the total income tax expense for 2014?
What is the total income tax expense for 2014?
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Which of the following correctly describes deferred tax expense for 2014?
Which of the following correctly describes deferred tax expense for 2014?
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What were the future taxable amounts indicated for 2015 and 2016?
What were the future taxable amounts indicated for 2015 and 2016?
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What was the cumulative temporary difference as of the end of 2014?
What was the cumulative temporary difference as of the end of 2014?
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How was the deferred tax liability calculated from the schedule provided?
How was the deferred tax liability calculated from the schedule provided?
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What was the total taxable income for ABC Company over the three years?
What was the total taxable income for ABC Company over the three years?
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In 2015, what was the difference between income tax expense and income taxes payable?
In 2015, what was the difference between income tax expense and income taxes payable?
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Which accounting method is typically used for financial reporting by companies?
Which accounting method is typically used for financial reporting by companies?
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What was the deferred tax liability account amount in 2016?
What was the deferred tax liability account amount in 2016?
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What will happen in cases where taxes will be lower in the future?
What will happen in cases where taxes will be lower in the future?
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What triggers the creation of a deferred tax liability?
What triggers the creation of a deferred tax liability?
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What does a deferred tax asset represent?
What does a deferred tax asset represent?
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What caused the differences between income tax expense and income taxes payable for ABC Company?
What caused the differences between income tax expense and income taxes payable for ABC Company?
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What was the income tax payable for ABC Company in 2017?
What was the income tax payable for ABC Company in 2017?
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How does deferred tax liability affect a company's income tax expense?
How does deferred tax liability affect a company's income tax expense?
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What could cause a difference in reported income tax expense under IFRS and tax authorities' rules?
What could cause a difference in reported income tax expense under IFRS and tax authorities' rules?
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What is defined as a temporary difference?
What is defined as a temporary difference?
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What does the term 'timing difference' refer to in the context of deferred taxes?
What does the term 'timing difference' refer to in the context of deferred taxes?
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Which scenario is likely to create a deferred tax liability?
Which scenario is likely to create a deferred tax liability?
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What is a key characteristic of deferred tax liabilities?
What is a key characteristic of deferred tax liabilities?
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In what situation would a deferred tax asset arise?
In what situation would a deferred tax asset arise?
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What is the FASB's position regarding the recognition of deferred tax assets?
What is the FASB's position regarding the recognition of deferred tax assets?
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How much is the deferred tax asset recorded for Groh's loss carry forward of $200,000 at a 40% tax rate?
How much is the deferred tax asset recorded for Groh's loss carry forward of $200,000 at a 40% tax rate?
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Which of the following accounts includes the benefits due to loss carry back in Groh's accounting?
Which of the following accounts includes the benefits due to loss carry back in Groh's accounting?
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What total income tax benefit is presented on Groh's 2014 income statement from both carry back and carry forward?
What total income tax benefit is presented on Groh's 2014 income statement from both carry back and carry forward?
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What effect does the deferred tax asset of $80,000 have on Groh's income tax expense?
What effect does the deferred tax asset of $80,000 have on Groh's income tax expense?
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How does Groh calculate its current tax benefit for the year?
How does Groh calculate its current tax benefit for the year?
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What is the net loss reported by Groh after accounting for tax benefits in 2014?
What is the net loss reported by Groh after accounting for tax benefits in 2014?
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Which of the following is recognized as a benefit due to loss carry forward in Groh's accounting?
Which of the following is recognized as a benefit due to loss carry forward in Groh's accounting?
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What is the taxable income for the company based on the provided information?
What is the taxable income for the company based on the provided information?
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What does the income tax payable amount to based on the taxable income?
What does the income tax payable amount to based on the taxable income?
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What is the total income tax expense recorded in the journal entry?
What is the total income tax expense recorded in the journal entry?
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Which of the following journal entries represents the recognition of a deferred tax liability?
Which of the following journal entries represents the recognition of a deferred tax liability?
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What is the reason for recognizing deferred tax assets?
What is the reason for recognizing deferred tax assets?
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Which of the following statements about the depreciation expense is correct?
Which of the following statements about the depreciation expense is correct?
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How much does the deferred tax liability amount to?
How much does the deferred tax liability amount to?
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If the taxable income were to increase by $5 million, what would be the new income tax obligation?
If the taxable income were to increase by $5 million, what would be the new income tax obligation?
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Study Notes
Deferred Taxes Overview
- Difference between income tax paid and income tax accrued results in a surplus or deficit.
- Types of deferred taxes include Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA).
Deferred Tax Liabilities (DTLs)
- Recognized when current tax is lower than accrued tax under accrual basis.
- Arises due to timing differences where income recognition is delayed or expenses are recognized early, leading to lower current taxable income that reverses in future.
- Represents future tax payments due to temporary taxable differences.
- Created when income tax expense exceeds taxes payable; the underpaid amount is recorded as a liability.
- Must comply with guidelines set by tax authorities, which may differ from accounting standards like IFRS.
Deferred Tax Assets (DTAs)
- Represents an asset that occurs when a company has overpaid taxes or paid them in advance.
- Recognized when the carrying amount of an asset is lower than its tax base, or when a liability's carrying amount is higher than its tax base.
Income Tax Expense vs. Income Taxes Payable
- Income tax expense and income taxes payable may differ yearly but remain equal in total over the assessed period.
- Companies use full accrual method for financial reports while modified cash basis for tax returns.
- Example with ABC Company shows differences attributed to varying reporting methods:
- 2015: DTL increased by $12,000
- 2016: DTL reduced by $8,000
- 2017: DTL reduced by $4,000
- Each DTL reflects taxes that will be paid in future periods, characterized as deferred tax amounts.
Future Taxable and Deductible Amounts
- Temporary difference defined as discrepancy between an asset or liability's tax basis and its reported book value leading to future taxable or deductible amounts.
- Example computation of deferred tax liability illustrates cumulative temporary differences resulting in future taxable amounts.
Income Tax Expense Calculation Example
- Calculation involves current tax expenses plus deferred tax expenses, with findings from ABC Company showing:
- DTL increased by $12,000 from beginning to end of 2014.
- Total income tax expense for 2014 amounted to Br 28,000.
Journal Entries for Tax Recording
- Income tax expense recorded as follows:
- Income tax expense: $8,800,000
- Income taxes payable: $8,000,000
- Deferred tax liability: $800,000
- Journal entries for future utilization of deferred tax liabilities noted for accuracy in future accounting periods.
Recognition of Deferred Tax Assets
- Deferred tax assets recognized for deductible temporary differences and operating loss carryforwards, based on the belief that both represent future tax-deductible amounts.
- Example highlights how to record operating loss carry forwards as DTAs, demonstrating tax benefits for the respective year.
Example of Loss Carryforward Accounting
- Groh Company records a 200,000operatinglosscarryforward,resultinginadeferredtaxassetof200,000 operating loss carryforward, resulting in a deferred tax asset of 200,000operatinglosscarryforward,resultinginadeferredtaxassetof80,000.
- Benefits of loss carryback reflect as income tax refund receivable and subsequently impact the income statement through contra income tax expense items.
Summary of Key Concepts
- DTL and DTA are essential for understanding future tax implications.
- Temporary differences are crucial in calculating deferred tax liabilities and assets.
- Accurate journal entries are necessary for tax expense and deferred tax liability management.
- Loss carryforwards create opportunities for future tax benefits, contributing to deferred tax assets on financial statements.
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Description
This quiz covers the concept of deferred taxes, focusing on the differences between tax paid and accrued. It explores types of deferred taxes, particularly deferred tax liabilities, and the circumstances under which they arise. Gain insights into tax accounting principles and their implications.
