1543. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #1 If a corporation has no subsidiaries outside the U.S. its book and taxable income are identical. a. True b. False 1544. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #2 Only U.S. corporations are included in a combined GAAP financial statement. a. True b. False 1545. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #3 Domestic and foreign entities owned more than 80% are included in a consolidated group’s U.S. tax return. a. True b. False 1546. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #4 Giant uses the “equity method” to account for the operations of its 40% owned subsidiary Little. A portion of Little’s profits for the year are included in Giant’s GAAP book income. a. True b. False 1547. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #5 The operations of an 80% or more owned domestic subsidiaries must be included in the parent corporation’s consolidated tax return. a. True b. False 1548. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #6 Yahr Inc. is a domestic corporation with no subsidiaries. It operates in almost every U.S. state. Yahr records no permanent or temporary book-tax differences this year. Yahr’s tax expense on its GAAP financial statements and its tax liability reported on its Federal income tax return are identical. a. True b. False 1549. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #7 “Temporary differences” are book-tax income differences that eventually appear in both the financial statements and the income tax return but not in the same reporting period. a. True b. False 1550. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #8 Schedule M-3 of the tax return Form 1120 reconciles financial statement net income after tax with a large corporation’s taxable income. a. True b. False 1551. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #9 “Permanent differences” include items that appear in the Federal income tax return as income or deduction and in the GAAP financial statements as revenue or expense but in different reporting periods. a. True b. False 1552. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #10 In general the purpose of ASC 740 (SFAS 109) is to compute and disclose the actual taxes paid by a business entity to state local Federal and foreign governments for the current year. a. True b. False 1553. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #11 The current tax expense reported on the GAAP financial statement generally represents the taxes actually payable to domestic or foreign governmental authorities. a. True b. False 1554. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #12 A deferred tax liability represents a potential future tax benefit associated with income reported in the current year GAAP financial statements. a. True b. False 1555. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #13 A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year GAAP financial statements. a. True b. False 1556. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #14 A deferred tax asset is the expected future tax benefit (savings) associated with income reported in the current year GAAP financial statements. a. True b. False 1557. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question TF #15 A deferred tax asset is the current tax benefit (savings) associated with income or expense to be reported in future year GAAP financial statements. a. True b. False
