Homework Answers
A Permanent difference occurs when revenue or expense recognized in books but not as taxable income, where as Temporary difference results in creation of deferred tax liability (DTL) or deferred tax asset (DTA) that are expected to reverse in future.
Ans to above ques. :-
1. MACRS depreciation is a Temporary difference as it results in creation of DTA/DTL that are likely to be reversed in future.
2. Magazine subscriptions are Temporary difference as it will results in DTL that will be taxable when received.
3. Interest expenses are Temporary differences as it will results in creation of DTA.
4. Such warranty expenses are temporary differences as they are recorded for books purposes and results in DTA that will reverse in future when recorded for tax purposes.
5. Interest income received on tax exempt municipal bonds are Permanent difference and no DTA/DTL will be created.
6. Sale of property recognized for tax on the installment basis but for financial reporting on the full accrual method is a Temporary difference that will results in creation of DTL.
7. Accrual fr financial reporting of a loss contingency associated with litigation is a Temporary difference that will results in creation of DTA.
8. Fines incurred for violations of pollution ordinance are a Permanent difference because such expenses are not allowed for tax purposes.
9. Prepaid insurance, are Temporary differences as it results in creation of DTA because such expenses are deductible when paid.
10. Proceeds from Keyman Life Insurance Policy are a Permanent difference because such proceeds are tax exempt.
11. Such write down of inventory are Temporary differences are temporary differences as it results in creation of DTA that will be reversed in future when sold for tax purposes.
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General Question/Exercise 16-7 Identify Permanent versus Temporary Differences Identify in the following circumstances whether the difference...
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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...
Listed below are items that are commonly accounted for differently for financial reporting purposes than they...
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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...
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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...
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...
Required information {The following information applies to the questions displayed below.) Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): Revenues Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 408 2018 $ 896 766 $ 130 $ 125 2019 $ 993 806 $ 187 $ 210 a. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2018 for $60 million. The cost is tax deductible in 2018 b....
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