Test I. Choose the correct answer from the given choices.

1. Future deductible amounts will cause:

(1 Point)
The recording of a future tax liability
The recording of a future tax asset
Taxable income to be more than pretax financial income in the future.
A decrease in pretax financial income in future years.
2
Which of the following is not a permanent difference?
(1 Point)
Proceeds of life insurance carried on key officers
Litigation accruals
Gold club membership dues
Fines resulting from a violation of law
3
All of the following are examples of temporary differences that result in taxable
amounts in future years except:
(1 Point)
Subscription received in advance
 Long-term construction contracts
Installment sales
Holding gains
4
Which entities are required to apply deferred tax accounting?

I. Public entities
II. Nonpublic entities

(1 Point)
Neither I nor II
II only
I only
Both I and II
5
An entity shall offset a deferred tax asset and deferred tax liability when

I. The deferred tax asset and deferred tax liability relate to income taxes levied by
the same taxing authority.
II. The entity has a legal enforceable right to offset a current tax asset against a
current tax liability.

(1 Point)
Neither I nor II
II only
I only
Both I and II
6
Which of the following is the most likely item to result in a deferred tax asset?
(1 Point)
Unearned revenue
Prepaid expense
Using the cost recovery method of recognizing construction revenue for tax purposes but using
percentage of completion method for financial reporting purposes.
Using accelerated depreciation for tax purposes but straight line depreciation for accounting
purposes.
7
When a change in the tax rate is enacted, the effect on existing future income tax
assets or liabilities is:
(1 Point)
Recorded prospectively over the number of years of the change until the period in which the
timing differences are expected to reverse.
Recorded immediately as retroactive adjustment to retained earnings.
Recorded as an adjustment to income tax expense in the period of the rate change.
Not recognized until the benefit or cost of the rate change is realized when the timing
differences actually reverse.
8
Recognizing tax benefit in a loss year due to a loss carryforward requires
(1 Point)
Creating a deferred tax liability.
Creating a deferred tax asset.
 Creating a new carryforward for the next year.
Only a footnote disclosure.
9
It is the amount attributable to an asset or liability for tax purposes.
(1 Point)
Taxable amount
Measurement base
Tax base
Carrying amount
10
Which of the following statements in relation to deferred assets and liabilities is
true?

I. Deferred tax liabilities are the amounts of income taxes payable in future
periods in respect of taxable temporary differences.
II. Deferred tax assets are the amounts of income taxes recoverable in future
periods in respect of deductible permanent differences.
(1 Point)
Neither I nor II
II only
I only
Both I and II
11
Test II. Problem Solving. The answer must be value (number) only. Do not
use period, comma, or any negative or positive sign. 

11. What amount should be reported as deferred tax asset?

MIND-YOR-OWN Entity reported the following assets and liabilities at year end:
 12
What amount should be reported as deferred tax liability?
(2 Points)

13
(Item 13-14) KUMU-TA Company is determining the amount of the pretax
accounting income for the current year by making adjustment to taxable income
from the income tax return. The tax return showed taxable income from the
income tax return. The tax return showed taxable income of P5,000,000 on which
a tax liability of P1,500,000 has been recognized. The entity provided the
following items that may be required to determine pretax accounting income
from the amount of taxable income:

·         Interest income on treasury bills was not included in the tax return. During
the year, P400,000 was received on these investments.

·         Goodwill impairment loss of P300,000 (nondeductible for tax purposes) was
not included as a deduction in the tax return but may be deducted in the income
statement.

·         Accelerated depreciation for income tax purposes was P600,000. Straight
line financial depreciation on these assets is P400,000.

 What is the current provision for income tax for the current year?
(2 Points)

14
What is the pretax accounting income for the current year?
(2 Points)
 15
15. On December 31, 2021, what amount should be reported as deferred tax
liability?
(2 Points)

16
On December 31, 2021, what amount should be reported as deferred tax asset?
(2 Points)

17
17. What is the current tax expense for the year?
(2 Points)

18
What is the future deductible amount for the year?
(2 Points)

19
What is the future taxable amount for the year?
(2 Points)

20
 What is the net deferred tax expense or benefit for the year?
(2 Points)

21
21. What is the net deferred tax expense?
(2 Points)

22
What is the current tax expense?

(2 Points)

23
23. What is the current tax liability at year-end?
(2 Points)
 24
What is the total income tax expense at year-end?
(2 Points)

25
What is the deferred tax liability at year-end?
(2 Points)

26
What is the deferred tax asset at year-end?

(2 Points)

27
27. What is the current tax expense?
(2 Points)

28
What is the total tax expense?
(2 Points)
 29
What is the deferred tax liability at year-end?
(2 Points)

30
What is the deferred tax asset at year-end?

(2 Points)

31
31. What is the amount of pretax financial income in 2020?
(2 Points)

32
What is the current tax expense for 2020?
(2 Points)

33
What is the net deferred tax expense on 2020?

(2 Points)

34
34. What is the amount of partial reversal of deferred tax liability on December
31, 2019?
(2 Points)
 35
What is the amount of partial reversal of deferred tax asset on December 31,
2019?

(2 Points)