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.
1. An accelerated depreciation system is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some plant assets.
2. A landlord collects some rents in advance. Rents received are taxable in the period when they are received.
References
3. Expenses are incurred in obtaining tax-exempt income.
4. Costs of guarantees and warranties are estimated and accrued for financial reporting purposes.
5. Instalment sales of investments are accounted for by the accrual method for financial reporting purposes and the instalment 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 shorter for tax purposes.
8. The tax return reports a deduction for 80% of the dividends received from various corporations. The cost method is used in accounting for the related investments for financial reporting purposes.
Homework Answers
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- The difference in the amount of depreciation, as per books and as per tax regulations will definitely give rise to deferred tax. As the company is using accelerated depreciation system as per tax, there will be more depreciation expense when compared to books in the initial stages, so deferred tax will arise for sure.
- The rents received in advance are also taxable but they are not a revenue as per GAAP'S, the rent will be recognised as a revenue only when they are accrued. So more taxable income when compared to accounting income will result in deferred tax.
- Tex exempt expenses, surely lead to deferred tax, these expenses reduce accounting income but do not have any impact on taxable income, so deferred tax will arise.
- Costs of guarantee and warranty are an expense for accounting purpose but not for tax purposes, so will result in deferred tax.
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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...
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. 1.Interest is received on an investment in tax-exempt governmental obligations. 2. For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes, but the assets’ lives are shorter for tax purposes. 3. The tax return reports a deduction for 80% of the dividends received from various corporations. The cost method is...
Listed below are items that are commonly accounted for differently for financial reporting purposes than they...
Listed below are items that are commonly accounted for
differently for financial reporting purposes than they are for tax
purposes.
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.
(3)
A permanent difference.
Use the...
Exercise 19-6 Listed below are items that are commonly accounted for differently for financial reporting purposes...
Exercise 19-6 Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. 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. (3) A permanent difference....
Question 3 --/1 View Policies Current Attempt in Progress Listed below are items that are commonly...
Question 3 --/1 View Policies Current Attempt in Progress Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. 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...
Listed below are items that are commonly accounted for differently for financial reporting purposes than they...
Listed below are items that are commonly accounted for
differently for financial reporting purposes than they are for tax
purposes.
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.
(3)
A permanent difference.
Use the...
General Question/Exercise 16-7 Identify Permanent versus Temporary Differences Identify in the following circumstances whether the difference...
General Question/Exercise 16-7 Identify Permanent versus Temporary Differences Identify in the following circumstances whether the difference is a permanent (P) or temporary (T) difference. MACRS depreciation is used for tax purposes but straight-line is used for financial reporting. Magazine subscriptions are taxable when received but recognized for financial reporting as the magazine is delivered. Interest expenses associated with obtaining a loan to invest in tax exempt securities. Warranty expense recorded for financial reporting when products are sold but recorded for...
Problem 1: For each of the following items, indicate whether it a. involves a Permanent (P)...
Problem 1: For each of the following items, indicate whether it a. involves a Permanent (P) or Temporary (T) difference between financial and taxable income b. represents a Future Deductible Amount (FDA) or a Future Taxable Amount (FTA) or Neither (N) c. will lead to a Deferred Tax Asset (DTA) or a Deferred Tax Liability (DTL) or Neither (N) Por T FDA, FTA, DTA, DTL or N or N Rents received in advance are credited to unearned revenue, but taxed...
For each item below, indicate whether it involves: (1) A temporary difference that will result in...
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. ll (2) A temporary difference that will result in future taxable amounts and, therefore, w (3) A permanent difference usually give rise to a deferred income tax liability. 1. Expenses incurred to entertain clients at a dinner at 2. Advance rental receipts; prepaid rent. Accrual basis for book. Cash...
Dexter Company appropriately uses the asset-liability method to record deferred income taxes. Dexter reports depreciation expense...
Dexter Company appropriately uses the asset-liability method to record deferred income taxes. Dexter reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purposes and the straight-line basis for financial reporting purposes. The tax deduction is the larger amount this year. Dexter received rent revenues in advance this year. These revenues are included in this year's taxable income. However, for financial reporting purposes, these revenues are reported as unearned revenues,...
15. Which of the following statements is correct? a. All current deferred tax liabilities and assets...
15. Which of the following statements is correct? a. All current deferred tax liabilities and assets shall be offset and presented as a single amount on the balance sheet. b. Deferred tax assets related to carryforwards shall be classified as current or noncurrent on the balance sheet based on their expected date of reversal. c. All current and noncurrent deferred taxes shall be offset and presented as a single amount on the balance sheet. d. Deferred tax liabilities and assets...
Listed below are items that are commonly accounted for
differently for financial reporting purposes than they are for tax
purposes.
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.
(3)
A permanent difference.
Use the...
Exercise 19-6 Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. 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. (3) A permanent difference....
Question 3 --/1 View Policies Current Attempt in Progress Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. 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...
Listed below are items that are commonly accounted for
differently for financial reporting purposes than they are for tax
purposes.
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.
(3)
A permanent difference.
Use the...
General Question/Exercise 16-7 Identify Permanent versus Temporary Differences Identify in the following circumstances whether the difference is a permanent (P) or temporary (T) difference. MACRS depreciation is used for tax purposes but straight-line is used for financial reporting. Magazine subscriptions are taxable when received but recognized for financial reporting as the magazine is delivered. Interest expenses associated with obtaining a loan to invest in tax exempt securities. Warranty expense recorded for financial reporting when products are sold but recorded for...
Problem 1: For each of the following items, indicate whether it a. involves a Permanent (P) or Temporary (T) difference between financial and taxable income b. represents a Future Deductible Amount (FDA) or a Future Taxable Amount (FTA) or Neither (N) c. will lead to a Deferred Tax Asset (DTA) or a Deferred Tax Liability (DTL) or Neither (N) Por T FDA, FTA, DTA, DTL or N or N Rents received in advance are credited to unearned revenue, but taxed...
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. ll (2) A temporary difference that will result in future taxable amounts and, therefore, w (3) A permanent difference usually give rise to a deferred income tax liability. 1. Expenses incurred to entertain clients at a dinner at 2. Advance rental receipts; prepaid rent. Accrual basis for book. Cash...
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