Chapter 19

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Author:
atcannon
ID:
287395
Filename:
Chapter 19
Updated:
2014-10-30 17:00:24
Tags:
Accounting 302
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Description:
Deferred Taxes
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  1. Net of tax
    • An accounting figure that has been adjusted for the effects of income tax.
    • (gross amount - tax)
  2. Intraperiod tax allocation
    The allocation of one year's income tax expense to the various sections of the income statement.
  3. Intraperiod tax allocation
    Disclosure technique
    • +Revenue
    • -Expense
    • =PreTax Net Income
    • -Income Tax Expense
    • =Net Income before Extraordinary Items
    • +Extraordinary Gain net of tax
    • -Extraordinary Loss net of tax
    • =Net Income
  4. Interperiod Tax Allocation
    Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. ("timing" differences)
  5. Tax Journal Entry
    • Dr. Income Tax Expense
    • Cr. Income Tax Payable
  6. "Taxable" Book Income
    • Pretax Book Income
    • +/- Permanent Differences
  7. Taxable Income
    • "Taxable" Book Income
    • +/- Temporary Differences
  8. Income Tax Expense
    "Taxable" Book Income * Rate
  9. Income Tax Payable
    Taxable Income * Rate
  10. Interest income on municipal bonds
    • Permanent difference
    • book revenue not tax 
    • TBI > TI
    • subtract from book for tax income
  11. Depletion in Excess of Cost
    • Permanent difference
    • tax expense not book 
    • TBI > TI
    • subtract from book for tax income
  12. Life Insurance Proceeds
    corporation beneficiary
    • Permanent Difference
    • book revenue not tax 
    • TBI > TI
    • subtract from book for tax income
  13. Fines and Penalties
    • Permanent Difference
    • book expense not tax 
    • TBI < TI
    • add to book for tax income
  14. Deferred Tax Liability when
    TBI > TI
  15. Deffered Tax Asset when
    TBI < TI
  16. Accrued Revenues
    • Temporary 
    • book revenue not tax 
    • TBI > TI , DTL
    • subtract from book for tax income
  17. Accelerated Tax Depreciation
    • Temporary 
    • tax expense not book 
    • TBI > TI , DTL
    • subtract from book for tax income
  18. Prepaid Expenses
    • Temporary 
    • tax expense not book 
    • TBI > TI , DTL
    • subtract from book for tax income
  19. Unearned Revenue
    • Temporary
    • tax revenue not book
    • TBI < TI , DTA
    • add to book for tax income
  20. Accrued Expense
    • Temporary
    • book expense not tax 
    • TBI < TI , DTA
    • add to book for tax income
  21. Estimated Expenses
    • Temporary
    • book expense not tax 
    • TBI < TI , DTA
    • add to book for tax income
  22. 8. Steps for deferred tax problems
    • 1. permanent or temporary difference
    • 2. sub permanent from PTI  for TBI
    • 3. temporary-DTA or DTL
    • 4. difference of book from tax amounts
    • 5. differences,add or subtract with TBI
    • 6. total info for TI
    • 7. calculate tax of differences, TBI, TI
    • 8. journal entry
  23. Effect of Changing Tax Rates 4 steps
    • 1. calc tax for future years with future rates
    • 2. total the amounts
    • 3. plug for current year deferred tax
    • 4. journal
    • Income tax exp - plug
    • Deferred tax- amount calculated
    • Income tax pay- current year rate
  24. Recognition of Deferred Tax Assets
    rules-more likely than not
    • If likely to be realized record the DTA
    • If  likely to not be realized record and negate effect in allowance
  25. Recognition of Deferred Tax Assets
    allowance journal entry
    • Dr. Income Tax Expense
    • Cr. Allowance

    *just reverse entry if found it will be realized
  26. Net Operating Losses
    carrying  options 2
    • 1 .carry back 2 years then forward 20
    • 2. carry forward 20
  27. Net Operating Losses
    carry back-previous years
    journal entry
    • Dr. Account Receivable (or cash)
    • Cr. Benefit (ITE)
  28. Net Operating Losses
    Carry forward-current year
    journal entry
    • Dr. Deferred Tax Asset
    • Cr. Benefits (ITE)
  29. Net Operating Losses
    future year carry forward applied
    journal entry
    • Dr. Income tax expense
    • Cr. Deferred Tax Asset
    • Cr. Income tax payable
  30. Balance Sheet Presentation
    4 steps
    • 1.Location of item causing deferred tax determines if a deferred tax is current or noncurrent
    • 2. Current section net for DTA or DTL
    • 3. Noncurrent section net for DTA or DTL
    • 4. Apply to corresponding section of balance sheet
  31. Income Statement Presentation
    4 steps
    • 1. Current = Income tax payable = Dr
    • 2. Deferred = DTA or DTL = Dr/Cr
    • 3. Income tax expense = Dr 
    • 4. determine effect  between current and deferred to keep income tax expense at its Dr. amount

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