Question

In: Accounting

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 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). 

Temporary Difference 1. Accrual of loss contingency; tax-deductible when paid. 2. Newspaper subscriptions; taxable when cash is received, recognized for financial reporting when the performance obligation is satisfied. 3. Prepaid rent; tax-deductible when paid. 4. Accrued bond interest expense; tax-deductible when paid. 5. Prepaid insurance; tax-deductible when paid 6. Unrealized

 

 

Solutions

Expert Solution

D 1. Accrual of loss contingency; tax-deductible when paid.
D 2. Newspaper subscriptions: taxable when received; recognized for financial reporting when earned.
T 3. Prepaid rent; tax-deductible when paid.
D 4. Accrued bond interest expense; tax-deductible when paid.
T 5. Prepaid insurance; tax-deductible when paid.
D 6. Unrealized loss from recording investments available for sale at fair value (tax-deductible when investments are sold).
D 7. Bad debt expense: allowance method for financial reporting; direct write-off for tax purposes.
D 8. Advance rent receipts on an operating lease (as the lessor); taxable when received.
T 9. Straight-line depreciation for financial reporting; accelerated depreciation for tax purposes.
D 10. Accrued expense for employee postretirement benefits; tax-deductible when subsequent payments are made.

D1. Accrual of loss contingency; tax-deductible when paid.

Junaid answered 2 years ago
Next > < Previous

Related Solutions

Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary...
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020. 1. Pearl Co. has developed the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 2025 Taxable amounts $200 $200 $200 $200 $200 Deductible amount — — — (1,700 ) 2. Martinez Co. has the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 Taxable amounts $200 $200 $200 $200 Deductible amount...
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary...
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020. 1. Larkspur Co. has developed the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 2025 Taxable amounts $400 $400 $400 $400 $400 Deductible amount — — — (2,200 ) 2. Cullumber Co. has the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 Taxable amounts $400 $400 $400 $400 Deductible amount...
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary...
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020. 1. Sunland Co. has developed the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 2025 Taxable amounts $200 $200 $200 $200 $200 Deductible amount — — — (1,400 ) 2. Coronado Co. has the following schedule of future taxable and deductible amounts. 2021 2022 2023 2024 Taxable amounts $200 $200 $200 $200 Deductible amount...
Two independent situations are described below. Each situation has future deductible amounts and/or future taxable amounts...
Two independent situations are described below. Each situation has future deductible amounts and/or future taxable amounts produced by temporary differences. Situation 1 2 Taxable income $40,000 $80,000 Amounts at year-end: Future deductible amounts 5,000 10,000 Future taxable amounts –0– 5,000 Balances at beginning of year: Deferred tax asset 1,000 4,000 Deferred tax liability –0– 1,000 The enacted tax rate is 25% for both situations. Determine the income tax expense for the year. Situation 1 Situation 2 a.$10,000$20,000 b.$9,750$21,750 c.$5,000$17,000 d.$0$0
12. Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts...
12. Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: SITUATION 1 2 Taxable income $ 40,000 $ 80,000 Amounts at year-end: Future deductible amounts 5,000 10,000 Future taxable amounts 0 5,000 Balances at beginning of year, dr (cr): Deferred tax asset $ 1,000 $ 4,000 Deferred tax liability 0 1,000 The enacted tax rate is 40% for both situations. Required: For each situation determine the: situation 1 2 a...
Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced...
Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) Situation 1 2 3 4 Taxable income $ 137 $ 319 $ 325 $ 416 Future deductible amounts 28 33 33 Future taxable amounts 28 28 56 Balance(s) at beginning of the year: Deferred tax asset 4.6 22 9.2 Deferred tax liability 4.6 4.6 The enacted tax rate is 40%. Required: For each situation, determine the following: 1...
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...
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....
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...
Listed below are several transactions. For each transaction, indicate by letter whether the cash effect ofeach...
Listed below are several transactions. For each transaction, indicate by letter whether the cash effect ofeach transaction is reported in a statement of cash flows as an operating (O), investing (I), financing (F), ornoncash (NC) activity. Also, indicate whether the transaction is a cash inflow (+), cash outflow (-), orhas no effect on cash (N). The first answer is provided as an example. 1. Purhcased equipment with cash 2. Re-sold treasury stock 3. Paid the State of California franchise taxes...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT