5/12/2021 Quiz: Quiz 4: Deferred Taxes

Quiz 4: Deferred Taxes

Quiz Instructions
Compute for the correct answers/Choose the letter of the best answer. Round off your answers to the
nearest whole number.

Show your handwritten solutions with your name[Last name, First name] on the upper left corner of
every page. Upload your scanned/photographed scratch paper in the separate assignment published
(here: Quiz 4: Scratch Paper ).

No scratch paper = no grade.

Do not open any other tab while taking the quiz. Quiz log will be monitored.

Question 1 1 pts

Which of the following would create a permanent difference between pretax financial
income and taxable income?

Using accelerated depreciation for tax purposes and straight-line depreciation for accounting
purposes.

Purchasing equipment previously leased with an operating lease in prior years.

Using the percentage of completion method on long-term construction contracts.

Recording interest revenue on government-issued securities.

Question 2 1 pts

Current tax expense plus deferred tax expense is

A meaningless sum

https://feu.instructure.com/courses/65926/quizzes/634759/take 1/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

Income tax expense

Tax deductible expense

Income tax payable

Question 3 1 pts

In computing the change in deferred tax accounts, which tax rates are used?

Current tax rates

Past years’ tax rates

Enacted future tax rates

Estimated future tax rates

Question 4 1 pts

It is the income tax payable in future period in respect of taxable temporary

Deferred tax liability

Deferred tax asset

Current tax liability

Current tax asset

Question 5 1 pts

https://feu.instructure.com/courses/65926/quizzes/634759/take 2/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

An entity shall offset a deferred tax asset and deferred tax liability

When the deferred tax asset and income taxes are levied by different taxing authority.

When the entity has no legal enforceable right to offset.

When the income taxes are levied by the same taxing authority and the entity has a legal
enforceable right to offset a current tax asset against a current tax liability.

Under all circumstances.

Question 6 1 pts

It is the amount of income taxes payable in respect of taxable profit.

Tax expense

Current tax expense

Deferred tax expense

Deferred tax benefit

Question 7 1 pts

A future taxable amount is exemplified by

Revenue that is included in the tax return before it is included in pretax accounting income.

Gain that is included in the tax return before it is included in pretax accounting income.

Expense that is included in the tax return before it is included in pretax accounting income.

Expense that is included in the tax return before it is included in the pretax accounting
income.

https://feu.instructure.com/courses/65926/quizzes/634759/take 3/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

Question 8 1 pts

Current tax expense plus deferred tax expense is

A meaningless sum

Income tax expense

Tax deductible expense

All of these

Question 9 1 pts

Deferred tax amounts should be classified on the statement of financial position

As current or non-current based on their expected reversal dates.

Based on whether they have a net debit or credit balance.

Based on expected timing of settlement or realization.

As non-current assets or liabilities.

Question 10 1 pts

Which of the following is a correct formula to compute for the income tax expense?

Current income tax expense plus increase in deferred tax asset minus increase in deferred
tax liability
https://feu.instructure.com/courses/65926/quizzes/634759/take 4/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

Current income tax expense minus increase in deferred tax asset plus increase in deferred
tax liability.

Current income tax expense plus increase in deferred tax asset plus increase in deferred tax
liability.

Current income tax expense minus decrease in deferred tax asset plus decrease in deferred
tax liability.

Use the following information for the next four (4) questions:

The Company reported the following information during the first year of operations:

Pretax financial income 8,000,000

Nontaxable interest received 250,000

Long term loss accrual in excess of deductible amount 500,000

Tax depreciation in excess of financial depreciation 1,250,000

Income tax rate 30%

Question 11 1 pts

What is the current tax expense?

2,100,000

https://feu.instructure.com/courses/65926/quizzes/634759/take 5/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

Question 12 1 pts

What is the total tax expense?

2,325,000

Question 13 1 pts

What is the deferred tax liability at year end?

375,000

Question 14 1 pts

What is the deferred tax asset at year end?

150,000

Question 15 1 pts

On its December 31, 2021 statement of financial position, The Company has income
tax payable of P260,000 and a deferred tax asset of P400,000. The Company had
reported a deferred tax asset of P300,000 at December 31, 2020. No estimated tax
payments were made during 2021. At December 31, 2021, The Company determined
that it was probable that the deferred tax asset would be realized. In its 2021 income
statement, what amount should The Company report as total income tax expense?

https://feu.instructure.com/courses/65926/quizzes/634759/take 6/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

160,000

Question 16 1 pts

Current liabilities include accrued expenses with a carrying amount of P4,000. The
related expense has already been deducted for tax purposes. How much is the tax
base of the liability?

4,000

Question 17 1 pts

The Company has the following information:

12/31/20 12/31/21

Cumulative temporary difference giving rise to future taxable

Cumulative temporary difference giving rise to future

Tax rate 30% 30%

The net deferred tax expense for the year 2021 is

900,000

https://feu.instructure.com/courses/65926/quizzes/634759/take 7/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

Use the following information for the next four (4) questions:

Evade Company has the following financial statement elements for which the
December 31, 2021 carrying amount is different from the December 31, 2021 tax
basis:

Carrying
Tax basis Difference
amount

Equipment 5,500,000 4,000,000 1,500,000

Accrued liability – health care 500,000 0 500,000

Computer software cost 2,000,000 0 2,000,000

The difference between the carrying amount and tax basis of the equipment is due to
accelerated depreciation for tax purposes. The accrued liability is the estimated
health care cost that was recognized as expense in 2021 but deductible for tax
purposes when actually paid. In January 2021, Evade Company incurred P3,000,000
of computer software cost. Considering the technical feasibility of the project, this
cost was capitalized and amortized over 3 years for accounting purposes. However
the total amount was expensed in 2021 for tax purposes. The pretax accounting
income for 2021 is P15,000,000. The income tax rate is 30% and there are no
deferred taxes on January 1, 2021.

Question 18 1 pts

What is the current tax expense for the year 2021?

https://feu.instructure.com/courses/65926/quizzes/634759/take 8/9
5/12/2021 Quiz: Quiz 4: Deferred Taxes

3,600,000

Question 19 1 pts

What amount should be reported as total tax expense?

4,500,000

Question 20 1 pts

What amount should be reported as deferred tax liability on December 31, 2021?

1,050,000

Question 21 1 pts

What amount should be reported as deferred tax asset on December 31, 2021?

150,000

Not saved Submit Quiz

https://feu.instructure.com/courses/65926/quizzes/634759/take 9/9