Test bank taxation of individuals and business entities 2015 6e by brian c spilker chap017

Chapter 17 Accounting for Income Taxes True / False Questions ASC 740 governs how a company accounts for all taxes it incurs True False ASC 740 is the sole source of rules related to accounting for income taxes True False Temporary differences create either a deferred tax asset or a deferred tax liability True False Publicly-traded companies usually file their financial statements before they file their federal income tax returns True False The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements True False ASC 740 applies to accounting for state and local and international income taxes as well as federal income taxes True False The "current income tax expense or benefit" always represents the taxes paid or refunded in the current year True False The focus of ASC 740 is the income statement True False Tax-exempt interest from municipal bonds is an example of a permanent difference True False 17-1 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 10 The tax effects of permanent differences always show up in a company's computation of its effective tax rate True False 11 In general, a temporary difference reflects a difference in the financial basis and tax basis of an asset or liability on the balance sheet True False 12 Temporary differences that are cumulatively "favorable" are defined as taxable temporary differences True False 13 Brown Corporation reports $100,000 of gain from the sale of land on its income statement For tax purposes, Brown uses the installment method and reports gain of $10,000 The $90,000 difference in the gain reported is a deductible temporary difference True False 14 ASC 740 deals with accounting for uncertain tax positions True False 15 Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2015 The tax rate change will affect only deferred tax assets and liabilities that arise in 2015 and thereafter True False 16 A valuation allowance can reduce both a deferred tax asset and a deferred tax liability True False 17 A corporation evaluates the need for a valuation allowance by comparing both positive and negative evidence that the corporation will realize a deferred tax asset in the future True False 18 A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet True False 19 A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis True False 17-2 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 20 ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized True False 21 Potential interest and penalties that would be assessed on a disallowed unrecognized tax benefit must be recorded in a company's income tax expense under ASC 740 True False 22 Once determined, an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events True False 23 ASC 740 permits a corporation to net its current and long-term deferred tax liabilities True False 24 The classification of a deferred tax asset as current or long-term usually depends on the balance sheet classification of the asset or liability to which it relates True False 25 A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year True False Multiple Choice Questions 26 Which of the following taxes would not be accounted for under ASC 740? A B C D Income taxes paid to the German government Income taxes paid to the U.S government Value-added taxes paid to the Swiss government Income taxes paid to the City of New York 27 Which of the following organizations does not issue rules that apply to accounting for income taxes? A B C D 17-3 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 28 Which of the following statements best describes the objective(s) of ASC 740? A B C D To compute a corporation's current income tax liability or benefit To recognize deferred tax liabilities and assets To report permanent differences in the balance sheet To compute a corporation's current income tax liability or benefit and to recognize 29 Which of the following items does not result in a permanent difference? A B C D Accelerated tax depreciation in excess of straight-line book depreciation Interest income from a tax-exempt municipal bond Dividend received deduction on the income tax return Domestic manufacturing deduction on the income tax return 30 Which of the following temporary differences creates a deferred tax asset in the year in which it originates? A B C D Accelerated tax depreciation in excess of straight-line book depreciation Prepayment income reported on the tax return prior to being reported on the incom Gain reported on the income statement prior to being reported on the tax retu Prepayment deduction reported on the tax return prior to being reported on the in 31 Which of the following statements is true? A B C D Another name for a taxable temporary difference is an unfavorable difference Another name for a taxable temporary difference is a favorable difference Another name for a deductible temporary difference is a favorable difference Another name for a deductible temporary difference is a permanent differenc 32 Which of the following best describes the focus of ASC 740? A B C D ASC 740 takes an "asset and liability approach" that focuses on the balance she ASC 740 takes an "income and expense approach" that focuses on the income sta ASC 740 takes a "taxes paid or refunded approach" that focuses on the statemen ASC 740 takes a "permanent differences approach" that focuses on the effective 33 Grand River Corporation reported pretax book income of $500,000 Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $10,000, and favorable permanent differences of $90,000 Assuming a tax rate of 34%, the Corporation's current income tax expense or benefit would be: A B C D 17-4 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 34 Packard Corporation reported pretax book income of $500,000 Included in the computation were favorable temporary differences of $10,000, unfavorable temporary differences of $100,000, and unfavorable permanent differences of $90,000 Assuming a tax rate of 34%, the Corporation's current income tax expense or benefit would be: A B C D 35 Abbot Corporation reported pretax book income of $500,000 During the current year, the reserve for bad debts increased by $5,000 In addition, tax depreciation exceeded book depreciation by $40,000 Finally, Abbot received $3,000 of taxexempt life insurance proceeds from the death of one of its officers Using a tax rate of 34%, Abbot's current income tax expense or benefit would be: A B C D 36 Costello Corporation reported pretax book income of $500,000 During the current year, the reserve for bad debts increased by $5,000 In addition, tax depreciation exceeded book depreciation by $40,000 Finally, Costello received $3,000 of taxexempt life insurance proceeds from the death of one of its officers Using a tax rate of 34%, Costello's deferred income tax expense or benefit would be: A B C D $11,900 net deferred tax expense $11,900 net deferred tax benefit $15,300 net deferred tax benefit $15,300 net deferred tax expense 37 Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account This basis difference is characterized as: A B C D Deductible temporary difference Taxable temporary difference Favorable permanent difference Unfavorable permanent difference 17-5 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 38 Which of the following items is not a temporary difference? A B C D Vacation pay accrued for tax purposes in a prior period is deducted in the curren Tax depreciation for the period exceeds book depreciation A goodwill impairment expense is recorded on the income statement; the goodwi Bad debts charged off in the current period exceed the bad debts accrued in the c 39 Smith Company reported pretax book income of $400,000 Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000 Using a tax rate of 34%, Smith's deferred income tax expense or benefit would be: A B C D Net deferred tax expense of $10,200 Net deferred tax benefit of $10,200 Net deferred tax expense of $23,800 Net deferred tax benefit of $23,800 40 Which of the following book-tax basis differences results in a deductible temporary difference? A B C D Book basis of an employee post-retirement benefits liability exceeds its tax bas Book basis of a building exceeds the tax basis of the building Book basis of an acquired intangible exceeds the tax basis of the intangible Tax basis of a prepaid liability exceeds the book basis of the liability 41 Which of the following items is not a permanent book/tax difference? A B C D Tax-exempt life insurance proceeds Non-deductible meals and entertainment expense Accrued vacation pay liability not paid within the first 2½ months of the next ta Domestic production activities deduction 42 Marlin Corporation reported pretax book income of $1,000,000 During the current year, the net reserve for warranties increased by $25,000 In addition, book depreciation exceeded tax depreciation by $100,000 Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current year taxable income Using a tax rate of 34%, Marlin's current income tax expense or benefit would be: A B C D 17-6 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 43 Swordfish Corporation reported pretax book income of $1,000,000 During the current year, the net reserve for warranties increased by $25,000 In addition, book depreciation exceeded tax depreciation by $100,000 In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000 Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current year taxable income Using a tax rate of 34%, Swordfish's deferred income tax expense or benefit would be: A B C D $25,500 net deferred tax expense $25,500 net deferred tax benefit $42,500 net deferred tax benefit $42,500 net deferred tax expense 44 Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000 This basis difference is characterized as: A B C D Deductible temporary difference Taxable temporary difference Favorable permanent difference Unfavorable permanent difference 45 Which of the following statements is true? A B C D ASC 740 focuses on the income tax expense or benefit on the income statemen ASC 740 focuses on the balances in the deferred tax assets and liabilities on the b ASC 740 focuses on the income taxes paid or refunded in the Statement of Cash ASC 740 focuses on the computation of a company's effective tax rate in the inco 46 Bruin Company received a $100,000 insurance payment on the death of its company president The company annually paid $1,000 of non-deductible insurance premiums on the policy Bruin reported the insurance receipt as income and deducted the premium payments on its books For ASC 740 purposes, the income and deduction are characterized as: A B C D Both are taxable temporary differences Both are deductible temporary differences The insurance receipt is a favorable permanent difference and the premium paym The insurance receipt is a taxable temporary difference and the premium paymen 47 Which of the following statements is true? A B C D A change in capitalized inventory costs under §263A always produces an increase A change in capitalized inventory costs under §263A always produces a decrease i A change in capitalized inventory costs under §263A can produce an increase or a A change in capitalized inventory costs under Đ263A always produces a permanen 17-7 Copyright â 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 48 Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 During the year, Robinson reported pretax book income of $400,000 Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000 During the year, the company's tax rate increased from 34% to 35% Robinson's deferred income tax expense or benefit for the current year would be: A B C D Net deferred tax benefit of $10,500 Net deferred tax expense of $10,500 Net deferred tax benefit of $11,500 Net deferred tax expense of $11,500 49 Which of the following statements is true? A B C D In determining if a valuation allowance is needed, positive evidence is considered In determining if a valuation allowance is needed, negative evidence is considered In determining if a valuation allowance is needed, negative and positive evidence In determining if a valuation allowance is needed, only negative evidence is eva 50 Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes? A B C D A valuation allowance is a contra account to deferred tax assets only A valuation allowance is a contra account to deferred tax liabilities only A valuation allowance is a contra account to deferred tax assets and liabilities A valuation allowance is a contra account to noncurrent deferred tax assets on 51 A valuation allowance is recorded against a deferred tax asset when: A B C D It is probable that the deferred tax asset will not be realized in the future It is more likely than not that the deferred tax asset will not be realized in the fu It is highly likely the deferred tax asset will not be realized in the future It is remote the deferred tax asset will not be realized in the future 52 Knollcrest Corporation has a cumulative book loss over the past 36 months Which of the following statements best describes how this fact enters into the valuation allowance analysis? A B C D The book loss is considered sufficient negative evidence that a valuation must be The book loss is considered negative evidence that must be evaluated along with The book loss is not considered negative evidence because it relates to book inco A cumulative book loss is considered negative evidence only after a period of 60 17-8 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 53 Which of the following items is not considered evidence in determining if a valuation allowance is necessary? A B C D A cumulative book loss over some period of time Management projects future taxable income based on a backlog of signed contr A net operating loss expired unused in the current year Management can implement a tax strategy to create future taxable income, but i 54 Which of the following statements best describes "book equivalent of taxable income" (BETI)? A B C D BETI is book income adjusted for all permanent and temporary differences BETI is book income adjusted for all temporary differences BETI is book income adjusted for all permanent differences BETI is book income before adjustment for all permanent and temporary differe 55 Jones Company reported pretax book income of $400,000 Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000 Book equivalent of taxable income is: A B C D 56 Tuna Corporation reported pretax book income of $1,000,000 During the current year, the net reserve for warranties increased by $25,000 In addition, book depreciation exceeded tax depreciation by $100,000 Finally, Tuna subtracted a dividends received deduction of $15,000 in computing its current year taxable income Book equivalent of taxable income is: A B C D 17-9 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 57 Weaver Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 During the year, Weaver reported pretax book income of $400,000 Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000 During the year, the company's tax rate decreased from 34% to 30% Weaver's deferred income tax expense or benefit for the current year would be: A B C D Net deferred tax benefit of $9,000 Net deferred tax expense of $9,000 Net deferred tax benefit of $5,000 Net deferred tax expense of $5,000 58 Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable temporary difference of $200,000 During the year, Lynch reported pretax book income of $800,000 Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000 During the year, the company's tax rate decreased from 34% to 30% Lynch's deferred income tax expense or benefit for the current year would be: A B C D Net deferred tax benefit of $9,000 Net deferred tax expense of $9,000 Net deferred tax benefit of $1,000 Net deferred tax expense of $1,000 59 Which of the following statements about ASC 740 as it relates to uncertain tax positions is true? A B C D ASC 740 deals with all tax benefits involving income and non-income taxes ASC 740 deals with whether a recognized income tax benefit will be realized ASC 740 deals with recognized tax benefits related to income tax positions claime ASC 740 deals with recognized tax benefits related to income tax positions regard 60 Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions? A B C D ASC 740 requires a company to complete a two-step analysis every time it evaluat ASC 740 requires a company to complete step (measurement) in its evaluation o ASC 740 allows a company to take into account the probability of audit by a tax a ASC 740 allows a company to record a tax benefit from an uncertain tax position 17-10 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 91 Weber Corporation reported pretax book income of $400,000 Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $300,000, and unfavorable permanent differences of $200,000 Compute the Company's book equivalent of taxable income Use this number to compute the Company's total income tax provision or benefit, assuming a tax rate of 34% BETI of $600,000 and a total income tax provision of $204,000 Feedback: Book equivalent of taxable income takes into account only permanent differences AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-03 Recall what a valuation allowance represents and describe the process by which it is determined Level of Difficulty: Easy Topic: Determining whether a valuation allowance is needed 17-251 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 92 DeWitt Corporation reported pretax book income of $800,000 Tax depreciation exceeded book depreciation by $400,000 In addition, the company received $100,000 of tax-exempt municipal bond interest DeWitt used a net operating loss carryover of $200,000 to offset taxable income in the current year Compute DeWitt's book equivalent of taxable income Use this number to compute DeWitt's total income tax provision or benefit for the current year, assuming a tax rate of 34% BETI of $700,000 and a total income tax provision of $238,000 Feedback: Book equivalent of taxable income takes into account only permanent differences AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-02 Calculate the current and deferred income tax expense or benefit components of a company's income tax provision Level of Difficulty: Medium Topic: Calculating the current and deferred income tax expense or benefit components of a company's income tax provision 17-252 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 93 MAC, Inc completed its first year of operations with a pretax loss of $300,000 The tax return showed a net operating loss of $500,000, which MAC will carry forward The $200,000 book-tax difference results from excess tax depreciation over book depreciation Management has determined that they should record a valuation allowance equal to the net deferred tax asset Assuming a tax rate of 34%, prepare the journal entries to record the deferred tax provision and the valuation allowance The deferred tax liability related to depreciation reduces the net deferred tax asset Feedback: AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-03 Recall what a valuation allowance represents and describe the process by which it is determined Level of Difficulty: Medium Topic: Determining whether a valuation allowance is needed 17-253 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 94 Lafayette, Inc completed its first year of operations with a pretax loss of $800,000 The tax return showed a net operating loss of $750,000, which the company will carry forward The $50,000 book-tax difference results from a disallowed deduction for meals and entertainment Management has determined that they should record a valuation allowance equal to the net deferred tax asset Assuming a tax rate of 34%, prepare the journal entries to record the deferred tax provision and the valuation allowance The disallowed meals and entertainment is a permanent difference and does not reduce the valuation allowance Feedback: AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-03 Recall what a valuation allowance represents and describe the process by which it is determined Level of Difficulty: Medium Topic: Determining whether a valuation allowance is needed 17-254 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 95 Morgan Corporation determined that $2,000,000 of its domestic production activities deduction on its current year tax return was uncertain, but that it was more likely than not to be sustained on audit Management made the following assessment of the company's potential tax benefit from the deduction and its probability of occurring Under ASC 740, what amount of the tax benefit related to the domestic production activities deduction can Morgan recognize in calculating its income tax provision in the current year? $510,000 Feedback: The amount that has a cumulative probability of more than 50% of occurring AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-04 Explain how a company accounts for its uncertain income tax positions under FASB ASC Topic 740 Level of Difficulty: Medium Topic: Accounting for uncertainty in income tax positions 17-255 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 96 Acai Corporation determined that $5,000,000 of its R&D credit on its current year tax return was uncertain Acai determined that there was a 40 percent chance of the credit being sustained on audit Management made the following assessment of the company's potential tax benefit from the R&D credit and its probability of occurring Under ASC 740, what amount of the tax benefit related to the R&D credit can Acai recognize in calculating its income tax provision in the current year? $0 Feedback: Acai cannot record any tax benefit unless it is more likely than not that the position will be sustained on its tax return AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-04 Explain how a company accounts for its uncertain income tax positions under FASB ASC Topic 740 Level of Difficulty: Medium Topic: Accounting for uncertainty in income tax positions 17-256 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 97 Moody Corporation recorded the following deferred tax assets and liabilities: All of the deferred tax accounts relate to temporary differences that result from the company's U.S operations Moody wants to minimize the number of deferred tax accounts it reports on the balance sheet What is the minimum number of deferred tax accounts Moody can report on its balance sheet and what are the names and dollar amounts in each account? $100,000 net current deferred tax liability and $1,200,000 net non-current deferred tax liability Feedback: ASC 740 allows a company to net deferred tax assets and liability of the same classification (current and non-current) if they arise in the same tax jurisdiction AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Analyze Blooms: Apply Learning Objective: 17-05 Recognize the different components of a company's disclosure of its income tax accounts in the financial statements and footnotes and comprehend how a company computes and discloses the components of its "effective tax rate." Level of Difficulty: Easy Topic: Financial statement disclosure and the computation of a corporation's effective tax rate 17-257 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 98 Manchester Corporation recorded the following deferred tax assets and liabilities: The current deferred tax accounts and the non-current deferred tax liabilities result from temporary differences that relate to the company's U.S operations The noncurrent deferred tax asset relates to the company's German operations Manchester wants to minimize the number of deferred tax accounts it reports on the balance sheet What is the minimum number of deferred tax accounts Manchester can report on its balance sheet and what are the names and dollar amounts in each account? $100,000 net current deferred tax liability, $800,000 non-current deferred tax asset, $2,000,000 non-current deferred tax liability Feedback: ASC 740 allows a company to net deferred tax assets and liability of the same classification (current and non-current) if they arise in the same tax jurisdiction AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-05 Recognize the different components of a company's disclosure of its income tax accounts in the financial statements and footnotes and comprehend how a company computes and discloses the components of its "effective tax rate." Level of Difficulty: Medium Topic: Financial statement disclosure and the computation of a corporation's effective tax rate 17-258 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 17-259 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 99 Oriole Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $1,200,000 The unfavorable book-tax difference of $200,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $300,000 due to an increase in the reserve for bad debts, and a $100,000 unfavorable permanent difference from the disallowance of compensation expense related to the exercise of incentive stock options Oriole Company's applicable tax rate is 34% a Compute Oriole Company's current income tax expense b Compute Oriole Company's deferred income tax expense or benefit c Compute Oriole Company's effective tax rate d Provide a reconciliation of Oriole Company's effective tax rate with its hypothetical tax rate of 34% See solution below 17-260 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-02 Calculate the current and deferred income tax expense or benefit components of a company's income tax provision Learning Objective: 17-05 Recognize the different components of a company's disclosure of its income tax accounts in the financial statements and footnotes and comprehend how a company computes and discloses the components of its "effective tax rate." Level of Difficulty: Hard Topic: Calculating the current and deferred income tax expense or benefit components of a company's income tax provision Topic: Financial statement disclosure and the computation of a corporation's effective tax rate 17-261 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 17-262 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 100 Izzo Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $800,000 The favorable book-tax difference of $200,000 was due to a $100,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $50,000 due to accrued vacation pay, and a $150,000 favorable permanent difference from the domestic manufacturing deduction Izzo Company's applicable tax rate is 34% a Compute Izzo Company's current income tax expense b Compute Izzo Company's deferred income tax expense or benefit c Compute Izzo Company's effective tax rate d Provide a reconciliation of Izzo Company's effective tax rate with its hypothetical tax rate of 34% See solution below 17-263 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education AACSB: Analytic AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Apply Learning Objective: 17-02 Calculate the current and deferred income tax expense or benefit components of a company's income tax provision Learning Objective: 17-05 Recognize the different components of a company's disclosure of its income tax accounts in the financial statements and footnotes and comprehend how a company computes and discloses the components of its "effective tax rate." Level of Difficulty: Hard Topic: Calculating the current and deferred income tax expense or benefit components of a company's income tax provision Topic: Financial statement disclosure and the computation of a corporation's effective tax rate 17-264 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 17-265 Copyright © 2015 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education ... Explain the objectives behind FASB ASC Topic 740; Income Taxes; and the income tax provision process Level of Difficulty: Easy Topic: Objectives of accounting for income taxes and the income tax provision... Objective: 17-01 Explain the objectives behind FASB ASC Topic 740; Income Taxes; and the income tax provision process Level of Difficulty: Easy Topic: Objectives of accounting for income taxes and. .. Objective: 17-02 Calculate the current and deferred income tax expense or benefit components of a company's income tax provision Level of Difficulty: Easy Topic: Calculating the current and deferred