Reference no: EM132965855

Question 1 - In what way is the accounting for uncertain tax positions like the accounting for assurance-type warranties?

Warranty liabilities and uncertain tax positions are contingent liabilities for probable claims.

Warranty liabilities and uncertain tax positions are permanent book-tax differences.

Warranty liabilities and uncertain tax positions are contingent assets for probable gains.

There are no similarities.

Question 2 - On January 1, 2020, SPACtacular Inc. acquired Druggy McBiotech Corp for $200 and recorded $150 of intangible assets. The tax code requires straight-line amortization of these intangible assets over 15 years. The financial accounting standard requires testing these intangible assets for impairment and recording an impairment if there is one.

On December 31, 2020, SPACtacular Inc. determined that the intangible assets were not impaired. The company recorded pre-tax book income of $30. The corporate income tax rate is 30%. The company did not have any other book-tax differences.

Record the journal entry for SPACtacular Inc.'s tax expense, taxes payable, and deferred tax assets or liabilities, if any, for 2020. (Select all that apply.)

Dr. Tax Expense -- $9

Cr. Taxes payable -- $9

Cr. Taxes payable -- $6

Cr. Deferred Tax Liabilities -- $3

Dr. Deferred Tax Assets -- $3

Dr. Tax Expense -- $6