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41.     A company uses the equity method to account for an investment. This would result in what type of difference and in what type of deferred income tax?
          Type of Difference     Deferred Tax
a.          Permanent     Asset
b.          Permanent     Liability
c.          Temporary     Asset
d.          Temporary     Liability

     42.     A company records an unrealized loss on short-term securities. This would result in what type of difference and in what type of deferred income tax?
          Type of Difference     Deferred Tax
a.          Temporary     Liability
b.          Temporary     Asset
c.          Permanent     Liability
d.          Permanent     Asset

     S43.     When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be
a.     handled retroactively in accordance with the guidance related to changes in accounting principles.
b.     considered, but it should only be recorded in the accounts if it reduces a deferred tax liability or increases a deferred tax asset.
c.     reported as an adjustment to tax expense in the period of change.
d.     applied to all temporary or permanent differences that arise prior to the date of the enactment of the tax rate change, but not subsequent to the date of the change.

     44.     Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if
a.     it is probable that a future tax rate change will occur.
b.     it appears likely that a future tax rate will be greater than the current tax rate.
c.     the future tax rates have been enacted into law.
d.     it appears likely that a future tax rate will be less than the current tax rate.

     45.     Recognition of tax benefits in the loss year due to a loss carryforward requires
a.     the establishment of a deferred tax liability.
b.     the establishment of a deferred tax asset.
c.     the establishment of an income tax refund receivable.
d.     only a note to the financial statements.

     46.     Major reasons for disclosure of deferred income tax information is (are)
a.     better assessment of quality of earnings.
b.     better predictions of future cash flows.
c.     that it may be helpful in setting government policy.
d.     all of these.

     47.     Accounting for income taxes can result in the reporting of deferred taxes as any of the following except
a.     a current or long-term asset.
b.     a current or long-term liability.
c.     a contra-asset account.
d.     All of these are acceptable methods of reporting deferred taxes.
     48.     Deferred taxes should be presented on the balance sheet
a.     as one net debit or credit amount.
b.     in two amounts: one for the net current amount and one for the net noncurrent amount.
c.     in two amounts: one for the net debit amount and one for the net credit amount.
d.     as reductions of the related asset or liability accounts.

     49.     Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on
a.     their expected reversal dates.
b.     their debit or credit balance.
c.     the length of time the deferred tax amounts will generate future tax deferral benefits.
d.     the classification of the related asset or liability.

     50.     Tanner, Inc. incurred a financial and taxable loss for 2007. Tanner therefore decided to use the carryback provisions as it had been profitable up to this year. How should the amounts related to the carryback be reported in the 2007 financial statements?
a.     The reduction of the loss should be reported as a prior period adjustment.
b.     The refund claimed should be reported as a deferred charge and amortized over five years.
c.     The refund claimed should be reported as revenue in the current year.
d.     The refund claimed should be shown as a reduction of the loss in 2007.

     S51.     A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be
a.     the net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year.
b.     totally eliminated from the financial statements if the amount is related to a noncurrent asset.
c.     based on the classification of the related asset or liability for financial reporting purposes.
d.     the total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater.

     52.     All of the following are procedures for the computation of deferred income taxes except to
a.     identify the types and amounts of existing temporary differences.
b.     measure the total deferred tax liability for taxable temporary differences.
c.     measure the total deferred tax asset for deductible temporary differences and operating loss carrybacks.
d.     All of these are procedures in computing deferred income taxes.

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