Which of the following transactions would not create a temporary difference? Group of answer choices The...

Which of the following transactions would not create a temporary difference?

Group of answer choices

The accrual of warranty expense

The accrual of bad debt expense

The cash payment to acquire a three-year insurance policy.

The cash collection of interest earned on a municipal bond.

Solutions

Expert Solution

A) The accrual of warranty expenses would create temporary difference, which is a deferred liability

B) The accrual bad debt expenses also would create temporary difference ,which is also a deferred liability

C) The cash payment to acquire a three year insurance policy would create temporary difference, if tax deduction in future year will be less than the book value expenses.

Note : But (D) that is ' The cash collection of interest earned on a municipal bond' is the example of permanent difference. It is not the example of temporary difference .

ekkarill92 answered 1 year ago

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