1. (LO 1) Identify some of the reasons why accounting for income taxes is complex.
2. (LO 1) True or False: ASC 740 applies to all taxes paid by a corporation. Explain.
3. (LO 1) True or False: ASC 740 is the sole source for the rules that apply to accounting for income taxes. Explain.
4. (LO 1) How does the fact that most corporations file their financial statements several months before they file their income tax returns complicate the income tax provision process?
5. (LO 1) What distinguishes an income tax from other taxes?
6. (LO 1)Briefly describe the six step process by which a company computes its income tax provision.
7. (LO 2) What are the two components of a companys income tax provision? What does each component represent about a companys income tax provision?
8. (LO 2) True or False: All differences between book and taxable income, both permanent and temporary, affect a companys effective tax rate. Explain.
9. (LO 2) When does a temporary difference resulting from an expense (deduction) create a taxable temporary difference? A deductible temporary difference?
10. (LO 2) When does a temporary difference resulting from income create a taxable temporary difference? A deductible temporary difference?
11. (LO 2) Briefly describe what is meant by the asset and liability or balance sheet approach taken by ASC 740 with respect to computing a corporations deferred tax provision.
12. (LO 2) Why are cumulatively favorable temporary differences referred to as taxable temporary differences?
13. (LO 2) Why are cumulatively unfavorable temporary differences referred to as deductible temporary differences?
14. ([LO 2) In addition to the current year tax return taxes payable or refundable, what other transactions can affect a companys current income tax provision?
15. (LO 2, 4) What is an unrecognized tax benefit and how does it affect a companys current income tax expense?
16. (LO 2) True or False: When Congress changes the corporate tax rates, only the current year book-tax temporary differences are measured using the new rates. Explain.
17. (LO 2) True or False: All temporary differences have a financial accounting basis. Explain.
18. (LO 3) What is the purpose behind a valuation allowance as it applies to deferred tax assets?
19. (LO 3)What is the difference between recognition and realization as it applies to the recording of a deferred tax asset on a balance sheet?
20. (LO 3) Briefly describe the four sources of taxable income a company evaluates in determining if a valuation allowance is necessary.
21. (LO 3) Which of the four sources of taxable income are considered objective and which are considered subjective? Which of these sources generally receives the most weight in analyzing whether a valuation allowance is necessary?
22. (LO 3) What are the elements that define a tax planning strategy as it applies to determining if a valuation allowance is necessary? Provide an example where a tax planning strategy may be necessary to avoid recording a valuation allowance.
23. (LO 3) When does a company remove a valuation allowance from its balance sheet?
24. (LO 3) What is a companys book equivalent of taxable income and how does this computation enter into the income tax provision process?
25. (LO 4) What motivated the FASB to issue FIN 48?
26. (LO 4) Briefly describe the two step process a company must undertake when it evaluates whether it can record the tax benefit from an uncertain tax position under ASC 740.
27. (LO 4) Distinguish between recognition and measurement as they relate to the computation of unrecognized tax benefits under ASC 740.
28. (LO 4) What is a tax positionas it relates to the application of ASC 740 to uncertain tax positions?
29. (LO 4) True or False: A company determines its unrecognized tax benefits with respect to a transaction only at the time the transaction takes place; subsequent events are ignored. Explain.
30. (LO 4) True or False: ASC 740 requires that a company treat potential interest and penalties related to an unrecognized tax benefit as part of its income tax provision. Explain.
