Intraperiod tax allocation

a. involves the allocation of income taxes between current and future periods.
b. associates tax effect with different items in the income statement.
c. arises because certain revenues and expenses appear in the financial statements either
before or after they are included in the income tax return.
d. arises because different income statement items are taxed at different rates.
ANS: B PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Measurement MSC: AACSB Analytic

55. In computing the change in deferred tax accounts, which of the following tax rates is used?
a. Current tax rate
b. Estimated future tax rates
c. Enacted future tax rates
d. Past years’ tax rates
ANS: C PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Measurement MSC: AACSB Analytic

56. Which of the following could never be subject to interperiod tax allocation?
a. Interest revenue on municipal bonds
b. Depreciation expense on operational assets
c. Estimated warranty expense
d. Rent revenue
ANS: A PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Measurement MSC: AACSB Analytic

57. Which of the following represents a permanent difference?

a. Point-of-sale revenue recognition for financial reporting purposes, installment method for
tax purposes
b. Goodwill amortization deducted on the tax return but not amortized for financial reporting
purposes
c. Straight-line depreciation for financial reporting purposes, accelerated depreciation for tax
purposes
d. Carryback, carryforward option for taxes, no such option for financial reporting purposes
ANS: B PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Measurement MSC: AACSB Analytic

58. During 2014, Epsilon Company had pretax accounting income of $620. Epsilon’s only temporary
difference for 2014 was the collection of a receivable that resulted in $220 of income under the
installment sales method of revenue recognition that Epsilon uses for tax purposes. The sale was
originally made in 2012 and recognized for accounting purposes at that time. Epsilon’s taxable income
for 2014 would be
a. $400.
b. $640.
c. $660.
d. $840.
ANS: D PTS: 1 DIF: Challenging OBJ: LO 2
TOP: AICPA FN-Measurement MSC: AACSB Analytic
59. Alpha had taxable income of $1,500 during 2014. Alpha used accelerated depreciation for tax purposes
($2,000) and straight-line depreciation for financial reporting purposes ($800). On December 30, 2014,
Alpha collected the January 2015 rent of $600 on a lot it rents on a month-by-month basis to Zenith.
Alpha’s pretax accounting income for 2014 would be
a. $900.
b. $2,100.
c. $3,300.
d. $3,700.
ANS: B PTS: 1 DIF: Challenging OBJ: LO 1
TOP: AICPA FN-Measurement MSC: AACSB Analytic

60. Tongass had pretax accounting income of $1,400 during 2014. Tongass used accelerated depreciation for
tax purposes ($1,000) and straight-line depreciation for financial reporting purposes ($200). During 2014,
Tongass accrued warranty expenses of $900 and paid cash to honor warranties of $500. Tongass’s taxable
income for 2014 would be
a. $200.
b. $1,000.
c. $1,800.
d. $2,600.
ANS: B PTS: 1 DIF: Challenging OBJ: LO 1
TOP: AICPA FN-Measurement MSC: AACSB Analytic