Instructions Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income. (b) If a \(76,000 balance in Deferred Tax Asset was computed by use of a 40% rate, the underlying cumulative temporary difference amounts to \)_______. (c) Deferred taxes ________ (are, are not) recorded to account for permanent differences. (d) If a taxable temporary difference originates in 2017, it will cause taxable income for 2017 to be ________ (less than, greater than) pretax financial income for 2017. (e) If total tax expense is \(50,000 and deferred tax expense is \)65,000, then the current portion of the expense computation is referred to as current tax _______ (expense, benefit) of \(_______. (f) If a corporation’s tax return shows taxable income of \)100,000 for Year 2 and a tax rate of 40%, how much will appear on the December 31, Year 2, balance sheet for “Income taxes payable” if the company has made estimated tax payments of \(36,500 for Year 2? \)________. (g) An increase in the Deferred Tax Liability account on the balance sheet is recorded by a _______ (debit, credit) to the Income Tax Expense account. (h) An income statement that reports current tax expense of \(82,000 and deferred tax benefit of \)23,000 will report total income tax expense of \(________. (i) A valuation account is needed whenever it is judged to be _______ that a portion of a deferred tax asset _______ (will be, will not be) realized. (j) If the tax return shows total taxes due for the period of \)75,000 but the income statement shows total income tax expense of \(55,000, the difference of \)20,000 is referred to as deferred tax _______ (expense, benefit).

Step by step solution

01

Introduction

Each of the following statements will have the below answers

02

Words/amounts to be filled in the blanks

(a) Greater than

(b) $\frac{\mathbf{\$}\mathbf{760}\mathbf{,}\mathbf{000}}{\mathbf{40}\mathbf{\%}}\mathbf{=}\mathbf{\$}\mathbf{190}\mathbf{,}\mathbf{000}$

(c) Are not

(d) Less than

(e) $15,000 (Benefit)

(f)$\left(\$100,000\times 40\%\right)\mathbf{-}\mathbf{\$}\mathbf{36}\mathbf{,}\mathbf{500}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{500}$

(g) Debit

(h)$\left(\$82,000-\$23,000\right)$

(I) More likely than not, it will not be

(j) Benefit

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