1. For each item below, indicate whether it involves: (1) A temporary difference that will result...

1. For each item below, indicate whether it involves: (1) A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. (2) A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. Use the appropriate number to indicate your answer for each. Answer (a) For some assets, straight-line depreciation is used for tax purposes while double-declining balance method is used for financial reporting purposes. (b) Warranty expenses are accrued when the sale is made, but cannot be deducted until the work is actually performed. (c) Accelerated depreciation for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some equipment. (d) A landlord collects some rents in advance. Rents received are taxable in the period when they are received. (e) For financial reporting purposes, an estimated loss from a lawsuit is accrued. The tax return will not report a deduction until an amount is paid. (f) A liability for a guarantee is accrued for financial reporting purposes. (g) Installment sales are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.

Solutions

Expert Solution

1	Temporary differences whether result in deferred tax assets or liabilities

a	Straight line depreciation will result in future deductible amount, therefore give rise to deferred income tax asset.
	Under double declining method depreciation is charges at double the rate of straight line depreciation.

b	Warranty expenses are deductible when work is actually performed thus will result in future deductible amount
	and will give rise to deferred income tax assets.

c	Accelerated depreciation for tax purposes will result in future taxable income and will give rise to deferred income
	tax liability

d	Rent received in advance and taxable when received will result in future deductible amounts and therefore will give
	rise to deferred income tax assets.

e	Estimated loss from lawsuit will result in future deductible amount when actually paid, therefore will give rise to
	deferred income tax assets.

f	Liability for guarantees will result in future deductible amount, therefore will give rise to deferred income tax assets.

g	Installment method for sales purpose will result in future taxable amount, thus will give rise to deferred tax liability.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

For each item listed below, indicate whether it involves a: a. permanent difference.

For each item listed below, indicate whether it involves a:a. permanent difference.b. temporary difference that will result in future deductible amounts (giving rise to deferred tax assets).c. temporary difference that will result in future taxable amounts (giving rise to deferred tax liabilities).____ 1. Rent is collected in advance from a tenant. Rent is taxable when received.____ 2. Warranty costs are accrued at the time of sale for accounting purposes, but are not deductible until paid for income tax purposes.____ 3....

Listed below are ten separate situations. For each item indicate whether the difference is (1) temporary...

Listed below are ten separate situations. For each item indicate whether the difference is (1) temporary creating a deferred tax asset (DTA) or a deferred tax liability (DTL) or (2) permanent by marking an X in the appropriate column. ITEM Temporary - DTA Temporary - DTL PERMANENT Pension fund contributions are less than pension expense for the current year, resulting in a pension liability on the company’s balance sheet. Dividend revenue recognized for accounting while a portion is deductible for...

1.) For each of the following accounts, indicate whether the account shown is a temporary or...

1.) For each of the following accounts, indicate whether the account shown is a temporary or permanent account: Account Temporary or Permanent 1. Cash [ Select ] ["Permanent", "Neither", "Temporary", "Both"] 2. Accounts Receivable [ Select ] ["Permanent", "Neither", "Both", "Temporary"]...

Indicate whether the items are permanent differences or temporary differences. For temporary differences, indicate whether they...

Indicate whether the items are permanent differences or temporary differences. For temporary differences, indicate whether they will create deferred tax assets or deferred tax liabilities. 5. Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes. 6. Interest is received on an investment in tax-exempt governmental obligations. 7. For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes, but the assets’ lives are...

For each item below, indicate whether a debit (DR) or a credit (CR) applies. _____

For each item below, indicate whether a debit (DR) or a credit (CR) applies. _____ a. Decrease in Accounts Payable _____ b. Decrease in Land _____ c. Increase in Retained Earnings _____ d. Increase in Unearned Revenue _____ e. Decrease in Notes Payable _____ f. Increase in Building _____ g. Increase in Wages Expense _____ h. Decrease in Office Supplies _____ i. Increase in Service Revenue _____ j. Increase in Common Stock

Listed below are 10 causes of temporary differences. For each temporary difference, indicate (by letter) whether it will create future deductible amounts (D) or future taxable amounts (T).

Listed below are costs found in various organizations. Required: For each cost item, indicate whether it...

Listed below are costs found in various organizations. Required: For each cost item, indicate whether it would be variable or fixed with respect to the number of units produced and sold; and then whether it would be a selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether it is a direct cost or an indirect cost with respect to units of product. Manufacturing Cost Cost Item Variable or Fixed Selling Cost Admin....

For each item listed below, indicate whether you feel it relates to financial or managerial accounting....

For each item listed below, indicate whether you feel it relates to financial or managerial accounting. Explain your reasoning behind your answer for each item. a. Projected net income for next quarter by division b. Defective goods produced as a percentage of all goods produced c. Income statement for the most current year, prepared in accordance with U.S. GAAP. d. Monthly sales broken down by geographic region e. Production department budget for the next quarter. f. Balance sheet at the...

Listed below is a group of temporary differences. For each item, identify if it leads to...

Listed below is a group of temporary differences. For each item, identify if it leads to a deferred tax asset (DTA) or a deferred tax liability (DTL). 1. Accrued of a loss contingency; tax deductible when paid. 2. Prepaid rent; tax deductible when paid 3. Warranty expenses estimated for financial reporting purposes; deductible for tax purposes when paid 4. Unrealized loss from recording investments at fair value; tax deductible when investments are sold 5. Advance rent receipts on an operating...

In the table below, indicate whether the item is included or excluded from the calculation of...

In the table below, indicate whether the item is included or excluded from the calculation of GDP. Some items may count negatively. Explain your answer, and in your explanation, if the item is included in GDP, please state whether the item counts in consumer expenditures (C), investment (I), government spending (G) or Net Exports (NX). Item Include/Exclude And Where (C, I, G, NX) Reason for Inclusion/Exclusion Jason McNamara’s purchase of a 1958 Edsel produced by Ford motor company from Mary...

Subjects