Financial Accounting 5th Canadian Edition By Harrison – Test Bank

11.2 Account for other items on the income statement

1) Taxable income is found on the:
A) income statement
B) balance sheet
C) tax return
D) retained earnings statement
Answer: C
Diff: 1 Type: MC
L.O.: L.O. 11-2

2) When a company sells a segment of its business, the gain or loss on the disposal of the segment is shown as:
A) other gains or losses on the income statement
B) part of the discontinued operations section on the income statement
C) an extraordinary item appearing on the income statement
D) an adjustment to the beginning balance of retained earnings
Answer: B
Diff: 2 Type: MC
L.O.: L.O. 11-2

3) A company that switches from straight-line amortization to double-declining-balance amortization during an accounting period must report this change on the financial statements as:
A) an extraordinary item
B) income from continuing operations
C) a prior-period adjustment
D) a cumulative effect of a change in accounting principle
Answer: D
Diff: 2 Type: MC
L.O.: L.O. 11-2

4) Pretax accounting income is found on the:
A) income statement
B) balance sheet
C) tax return
D) retained earnings statement
Answer: A
Diff: 1 Type: MC
L.O.: L.O. 11-2

5) Under ASPE, when pretax accounting income exceeds taxable income:
A) Prepaid Income Tax is debited
B) Prepaid Income Tax is credited
C) Future Tax Liability is credited
D) Future Tax Asset is debited
Answer: C
Diff: 2 Type: MC
L.O.: L.O. 11-2
6) Under IFRS, when income tax payable exceeds income tax expense:
A) Accumulated Income Tax is debited
B) Prepaid Income Tax is credited
C) Deferred Tax Liability is credited
D) Deferred Tax Asset is debited
Answer: D
Diff: 2 Type: MC
L.O.: L.O. 11-2

7) Income tax expense is based on ________ from the income statement while income tax payable is based on ________ from the income tax return.
A) net income, taxable income
B) taxable income, net income
C) pretax accounting income, taxable income
D) taxable income, pretax accounting income
Answer: C
Diff: 2 Type: MC
L.O.: L.O. 11-2

8) Under IFRS a deferred tax liability is classified as a ________ and income tax payable is classified as a ________ on the balance sheet.
A) current liability; current liability
B) current liability; non-current liability
C) non-current liability; current liability
D) non-current liability; non-current liability
Answer: C
Diff: 1 Type: MC
L.O.: L.O. 11-2

9) Challenger 605 Corporation, whose income tax rate is 35%, has pretax accounting income of $4,850,000 and taxable income of $4,075,000. Under ASPE, the entry to record the income tax includes a:
A) debit to Future Tax Asset for $271,250
B) debit to Future Tax Asset for $775,000
C) credit to Future Tax Liability for $271,250
D) credit to Future Tax Liability for $775,000
Answer: C
Diff: 3 Type: MC
L.O.: L.O. 11-2

10) Flexity Corporation, whose income tax rate is 35%, has taxable income of $592,600 and pretax accounting income of $494,000. The entry to record the income tax includes a:
A) debit to Income Tax Expense for $207,410
B) credit to Income Tax Payable for $207,410
C) credit to Income Tax Payable for $172,900
D) debit to Income Tax Payable for $172,900
Answer: B
Diff: 3 Type: MC
L.O.: L.O. 11-2
11) Mitrac Corporation, whose income tax rate is 35%, has pretax accounting income of $636,000 and taxable income of $748,000. Under IFRS, the entry to record the income tax includes a:
A) debit to Income Tax Expense for $261,800
B) credit to Income Tax Payable for $222,600
C) debit to Deferred Tax Asset for $39,200
D) credit to Deferred Tax Liability for $39,200
Answer: C
Diff: 3 Type: MC
L.O.: L.O. 11-2