Law question data bank Law question data bank Question 1543. TF #1 If a corporation has no subsidiaries outside the U.S., its book and taxable income are identical. a. True b. False Save your time! Proper editing and formatting Free revision, title page, and bibliography Flexible prices and money-back guarantee ORDER NOW 1544. TF #2 Only U.S. corporations are included in a combined GAAP financial statement. a. True b. False Make sure you submit a unique essay Our writers will provide you with an essay sample written from scratch: any topic, any deadline, any instructions. 100% ORIGINAL ORDER NOW 1545. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 1558. TF #16 The valuation allowance can reduce either a deferred tax asset or a deferred tax liability. a. True b. False 1559. TF #17 If a valuation allowance is increased in the current year, the corporation’s effective tax rate is higher than if the valuation allowance had not increased. a. True b. False 1560. TF #18 If a valuation allowance is decreased (released) in the current year, the corporation’s effective tax rate is higher than if the valuation allowance had not increased. a. True b. False 1561. TF #19 Under GAAP, a corporation can defer a disclosure of the future U.S. tax expense related to the earnings of foreign subsidiaries, by taking into account its repatriation plans for these earnings. a. True b. False 1562. TF #20 One can describe the benefits of ASC 740-30 (APB 23) as “all or nothing.” If it is elected, APB 23 applies to the earnings from all foreign subsidiaries, in the current year and thereafter. a. True b. False 1563. TF #21 Repatriating prior year earnings from a foreign subsidiary located in a low-tax country where ASC 740-30 (APB 23) benefits were previously adopted will cause an increase in a corporation’s current year effective tax rate. a. True b. False 1564. TF #22 The taxpayer should use the technique of ASC 740-30 (APB 23) income deferral only when the tax rates that apply to the subsidiary are less than those of the applicable U.S. income tax rate. a. True b. False 1565. TF #23 The income tax note to the GAAP financial statements includes a reconciliation of a corporation’s hypothetical tax on book income to its book tax expense as if it were taxed at the applicable U.S. income tax rates. a. True b. False 1566. TF #24 In the “rate reconciliation” of GAAP tax footnotes, temporary book-tax differences are reconciled between book income as if taxed at U.S. tax rates and the actual book income tax expense. a. True b. False 1567. TF #25 A $50,000 cash tax savings that is temporary has the same effect on a corporation’s current year effective tax rate as a $50,000 cash tax savings that is a permanent difference. a. True b. False 1568. TF #26 ASC 740 (FIN 48) allows companies to choose their own level of certainty in reporting uncertain tax positions in their financial statements. a. True b. False 1569. TF #27 ASC 740 (FIN 48) replaced FAS 5, Accounting for Contingencies, with regard to accounting for uncertain tax positions. a. True b. False 1570. TF #28 The major purpose of ASC 740 (SFAS 109) is to build a cushion into currently reported income tax expense in order to insure that the financial statements are conservative. a. True b. False 1571. TF #29 Current tax expense always totals the amount a taxpayer actually paid all Federal, state, and foreign tax authorities in a particular year. a. True b. False