C. gain at the time the decision is made.

20. An asset is considered impaired when

A. its fair value exceeds its carrying value.

B. its carrying value exceeds its fair value.

C. it ceases to provide an economic benefi t.

21. An asset impairment is most likely to impact reported

A. depreciation expense in future periods.

B. depreciation expense in the year impaired.

C. cash fl ow from operating activities in the year impaired.

22. When comparing the reported results of a company that complies with U.S. GAAP to

a company that complies with IFRS, return on assets is least likely to require an adjustment

for

A. goodwill amortization.

B. upwardly revalued assets.

C. acquired in - process R & D charges.

23. In the year of the revaluation, an asset revaluation that increases the carrying value of an

asset is most likely to

A. increase return on equity.

B. decrease reported leverage.

C. decrease shareholders ’ equity.

Chapter 12

1. Using the straight - line method of depreciation for reporting purposes and accelerated

depreciation for tax purposes would most likely result in a

A. valuation allowance.

B. deferred tax liability.

C. temporary difference.

2. In early 2009 Sanborn Company must pay the tax authority € 37,000 on the income it

earned in 2008. This amount was recorded on the company ’ s 31 December 2008 fi nancial

statements as

A. taxes payable.

B. income tax expense.

C. a deferred tax liability.

3. Income tax expense reported on a company ’ s income statement equals taxes payable, plus

the net increase in

A. deferred tax assets and deferred tax liabilities.

B. deferred tax assets, less the net increase in deferred tax liabilities.

C. deferred tax liabilities, less the net increase in deferred tax assets.

4. Analysts should treat deferred tax liabilities that are expected to reverse as

A. equity.

B. liabilities.

C. neither liabilities nor equity.

5. Deferred tax liabilities should be treated as equity when

A. they are not expected to reverse.

B. the timing of tax payments is uncertain.

C. the amount of tax payments is uncertain.

6. When both the timing and amount of tax payments is uncertain, analysts should treat

deferred tax liabilities as

A. equity.

B. liabilities.

C. neither liabilities nor equity.

7. When accounting standards require recognition of an expense that is not permitted

under tax laws, the result is a

A. deferred tax liability.

B. temporary difference.

C. permanent difference.

8. When certain expenditures result in tax credits that directly reduce taxes, the company

will most likely record

A. a deferred tax asset.

B. a deferred tax liability.

C. no deferred tax asset or liability.

9. When accounting standards require an asset to be expensed immediately but tax rules

require the item to be capitalized and amortized, the company will most likely record

A. a deferred tax asset.

B. a deferred tax liability.

C. no deferred tax asset or liability.

10. A company incurs a capital expenditure that may be amortized over fi ve years for

accounting purposes, but over four years for tax purposes. The company will most likely

record

A. a deferred tax asset.

Date: 2016-03-03; view: 731