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. Interest revenue is recorded on municipal bonds.

____ 4. Installment sales are recognized at the point of sale for accounting purposes, but when the cash is received for income tax purposes.

____ 5. A loss contingency is expensed for accounting purposes. The company expects to pay the amount involved in three years.

____ 6. Bad debt expense is estimated for accounting purposes, but is not deducted for income tax purposes until written off.

____ 7. The company paid a fine from the EPA for violation of environmental regulations.

Solutions

Expert Solution

1. Temporary Difference - will result into deferred tax asset as amount will be taxable in the current year i.e. year of receipt and next year when amount will be booked as per accrual accounting it will not form part of taxable income.

2. Temporary Difference - will result into deferred tax asset as expense will not deducted in current year and benefit will be provide in the year on the actual expense incurred. Hence, deferred tax asset will be created.

3. Temporary Difference - future deductible amounts (giving rise to deferred tax assets).

4. Temporary Difference - will result into deferred tax liability as amount will be taxable in the year of receipt.Hence, future taxable amounts (giving rise to deferred tax liabilities).

5. Temporary Difference - will result into deferred tax asset as amount will be tax deductable in the year of payment. Hence, future deductible amounts (giving rise to deferred tax assets).

6. Temporary Difference - will result into deferred tax asset as amount will be tax deductable in the year of payment. Hence, future deductible amounts (giving rise to deferred tax assets).

7. Permanant Difference - as it will not be allowed as per income tax.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

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 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 account listed below, indicate whether it is a nominal account or a permanent account...

For each account listed below, indicate whether it is a nominal account or a permanent account and identify the normal balance of the account (debit or credit). Select your answer by clicking in the drop down box to the right of each account. Be careful with matching questions because carmen randomizes the matches. Thus, if you print out the quiz to work on it and then enter your answers later in the week, it is very likely the order of...

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...

1) For each item listed below, indicate the effect on net income in arriving at cash...

1) For each item listed below, indicate the effect on net income in arriving at cash flows from operations by choosing one of the following code letters. Code Cash Flows from Operating Activities Add to Net Income A Deduct from Net Income D 1. A decrease in accounts receivable 2. Increase in inventory 3. Increase in prepaid expenses 4. A decrease in accounts payable 5. Decrease in accrued liabilities 6. Increase in income taxes payable...

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

For each of the factors listed below indicate whether the factor, independently, is likely to cause...

For each of the factors listed below indicate whether the factor, independently, is likely to cause a particular income producing property to trade for a lower or higher CAP rate compared with an average property. For this question, no explanation is needed. Indicating “higher”, “lower” or “irrelevant” for factors a through g is sufficient. Lower volatility in rent prices and occupancy rates. Worse location High inflation environment High risk premium environment Market general higher than normal expected NOI growth Lower...

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...

For each item listed, identify the activity and whether it is an inflow, an outflow or...

For each item listed, identify the activity and whether it is an inflow, an outflow or of a non-cash nature. Complete the table below. Item Activity Cash Flow a Dividends received b Taxation paid c Payments to suppliers and employees d Interest Paid e Purchase of property, plant, and equipment f Bonus issue of shares g Dividends paid h Proceeds on sale of investments i Interest received j Long-term borrowing k Goodwill write-down (impairment) l Profit on sale of equipment...

Subjects