CHAPTER 19 Accounting for Income Taxes

Topics

Questions

Brief

Exercises

Exercises

Problems

Concepts
for Analysis

 1.   Reconcile pretax financial income with taxable income.

1, 13

1, 2, 3, 4, 5,
12, 18, 20, 21

1, 2, 3, 4, 8

 2.   Identify temporary and permanent differences.

3, 4, 5

4, 5, 6, 7

2, 3, 4

3, 4, 5

 3.   Determine deferred income taxes and related items—single tax rate.

6, 7, 13

1, 2, 3, 4,
5, 6, 7, 9

1, 3, 4, 5, 7, 8, 12, 14, 15,
19, 21

3, 4, 8, 9

2

 4.   Classification of deferred taxes.

10, 11, 12

15

7, 11, 16, 18, 19, 20, 21, 22

3, 6

2, 3, 5

 5.   Determine deferred income taxes and related items— multiple tax rates, expected future income.

10

2, 13, 16, 17, 18, 20, 22

1, 2, 6, 7

1, 6, 7

 6.   Determine deferred taxes, multiple rates, expected future losses.

10

 7.   Carryback and carryforward
of NOL.

16, 17, 18,

12, 13, 14

9, 10, 23,
24, 25

5

 8.   Change in enacted future
tax rate.

14

11

16

2, 7

5, 6

 9.   Tracking temporary differences through reversal.

8, 17

2, 7

10.   Income statement presentation.

9

8

1, 2, 3, 4, 5, 7, 10, 12, 16, 19, 23, 24, 25

1, 2, 3, 5, 7, 8, 9

11.   Conceptual issues—tax
allocation.

1, 2, 8, 19

7

1, 2, 7

12.   Valuation allowance—deferred tax asset.

8, 19

7

7, 14, 15, 23, 24, 25

13.   Disclosure and other issues.

15

Learning Objectives

Brief Exercises

Exercises

Problems

1.     Identify differences between pretax
financial income and taxable income.

1, 2, 5

2.     Describe a temporary difference that
results in future taxable amounts.

1, 2, 4, 9, 10

1, 2, 3, 4, 5, 7,
8, 11, 12, 13,
16, 17, 18, 19, 20, 21, 22

1, 3, 4, 6,
7, 8, 9

3.     Describe a temporary difference that
results in future deductible amounts.

5, 6, 9

4, 5, 7, 8, 11, 12, 14, 15, 17, 18, 19, 20, 21, 22

1, 2, 4,
6, 8, 9

4.     Explain the purpose of a deferred tax
asset valuation allowance.

7, 14

7, 14, 15, 23,
24, 25

5.     Describe the presentation of income tax expense in the income statement.

4, 6, 8

1, 3, 4, 5, 8,
12, 15, 16

1, 2, 3, 4,
5, 7, 8, 9

6.     Describe various temporary and permanent differences.

4, 6, 7

2, 3, 9

7.     Explain the effect of various tax rates and tax rate changes on deferred income taxes.

11

13, 16, 17, 18, 21, 23, 24, 25

5, 7

8.     Apply accounting procedures for a loss carryback and a loss carryforward.

12, 13, 14

9, 10, 23,
24, 25

5

9.     Describe the presentation of deferred income taxes in financial statements.

3, 15

8, 11, 16, 19,
20, 21, 22

3, 5, 6, 8, 9

Item

Description

Level of

Difficulty

Time
(minutes)

E19-1

One temporary difference, future taxable amounts, one rate, no beginning deferred taxes.

Simple

15–20

E19-2

Two differences, no beginning deferred taxes, tracked through
2 years.

Simple

15–20

E19-3

One temporary difference, future taxable amounts, one rate, beginning deferred taxes.

Simple

15–20

E19-4

Three differences, compute taxable income, entry for taxes.

Simple

15–20

E19-5

Two temporary differences, one rate, beginning deferred taxes.

Simple

15–20

E19-6

Identify temporary or permanent differences.

Simple

10–15

E19-7

Terminology, relationships, computations, entries.

Simple

10–15

E19-8

Two temporary differences, one rate, 3 years.

Simple

10–15

E19-9

Carryback and carryforward of NOL, no valuation account, no temporary differences.

Simple

15–20

E19-10

Two NOLs, no temporary differences, no valuation account, entries and income statement.

Moderate

20–25

E19-11

Three differences, classify deferred taxes.

Simple

10–15

E19-12

Two temporary differences, one rate, beginning deferred taxes, compute pretax financial income.

Complex

20–25

E19-13

One difference, multiple rates, effect of beginning balance versus no beginning deferred taxes.

Simple

20–25

E19-14

Deferred tax asset with and without valuation account.

Moderate

20–25

E19-15

Deferred tax asset with previous valuation account.

Complex

20–25

E19-16

Deferred tax liability, change in tax rate, prepare section of income statement.

Complex

15–20

E19-17

Two temporary differences, tracked through 3 years,
multiple rates.

Moderate

30–35

E19-18

Three differences, multiple rates, future taxable income.

Moderate

20–25

E19-19

Two differences, one rate, beginning deferred balance, compute pretax financial income.

Complex

25–30

E19-20

Two differences, no beginning deferred taxes, multiple rates.

Moderate

15–20

E19-21

Two temporary differences, multiple rates, future taxable income.

Moderate

20–25

E19-22

Two differences, one rate, first year.

Simple

15–20

E19-23

NOL carryback and carryforward, valuation account versus no valuation account.

Complex

30–35

E19-24

NOL carryback and carryforward, valuation account needed.

Complex

30–35

E19-25

NOL carryback and carryforward, valuation account needed.

Moderate

15–20

Item

Description

Level of

Difficulty

Time
(minutes)

P19-1

Three differences, no beginning deferred taxes, multiple rates.

Complex

40–45

P19-2

One temporary difference, tracked for 4 years, one permanent difference, change in rate.

Complex

50–60

P19-3

Second year of depreciation difference, two differences, single rate, extraordinary item.

Complex

40–45

P19-4

Permanent and temporary differences, one rate.

Moderate

20–25

P19-5

NOL without valuation account.

Simple

20–25

P19-6

Two differences, two rates, future income expected.

Moderate

20–25

P19-7

One temporary difference, tracked 3 years, change in rates, income statement presentation.

Complex

45–50

P19-8

Two differences, 2 years, compute taxable income and pretax financial income.

Complex

40–50

P19-9

Five differences, compute taxable income and deferred taxes, draft income statement.

Complex

40–50

CA19-1

Objectives and principles for accounting for income taxes.

Simple

15–20

CA19-2

Basic accounting for temporary differences.

Moderate

20–25

CA19-3

Identify temporary differences and classification criteria.

Complex

20–25

CA19-4

Accounting and classification of deferred income taxes.

Moderate

20–25

CA19-5

Explain computation of deferred tax liability for multiple tax rates.

Complex

20–25

CA19-6

Explain future taxable and deductible amounts, how carryback and carryforward affects deferred taxes.

Complex

20–25

CA19-7

Deferred taxes, income effects.

Moderate

20–25