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ACC 305 WEEK 4 QUIZ 3
ACC 305 Week 4 Quiz 3 – STR NEW
1. Taxable income is a tax accounting term and is also referred to as income before taxes.
2. Pretax financial income is the amount used to compute income tax payable.
3. Taxable amounts increase taxable income in future years.
4. A deferred tax liability represents the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year.
5. Deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences.
6. A deferred tax asset represents the increase in taxes refundable in future years as a result of deductible temporary differences existing at the end of the current year.
7. A company reduces a deferred tax asset by a valuation allowance if it is probable that it will not realize some portion of the deferred tax asset.
8. Companies should consider both positive and negative evidence to determine whether it needs to record a valuation allowance to reduce a deferred tax asset.
9. A company should add a decrease in a deferred tax liability to income tax payable in computing income tax expense.
10. Taxable temporary differences will result in taxable amounts in future years when the related assets are recovered.
11. Examples of taxable temporary differences are subscriptions received in advance and advance rental receipts.
12. Permanent differences do not give rise to future taxable or deductible amounts.
13. Companies must consider presently enacted changes in the tax rate that become effective in future years when determining the tax rate to apply to existing temporary differences.
14. When a change in the tax rate is enacted, the effect is reported as an adjustment to income tax payable in the period of the change.