Identifying Tax Differences Listed below are ten separate situations. For each item indicate whether the difference is (1) temporary, creating a deferred tax asset or a deferred tax liability or (2) permanent. Item 1. Pension fund contributions are less than pension expense for the current year, resulting in a pension liability on the company’s balance sheet. 2. Dividend revenue recognized for accounting while a portion is deductible for taxes (dividends received deduction). 3. Estimated warranty costs: accrual basis for accounting and cash basis for income tax. 4. Fines expensed for accounting but not deductible for tax purposes. 5. Straight-line depreciation for accounting and accelerated depreciation for income tax. 6. Unrealized gain on investments: FV-NI recognized for accounting, but gain recognized only on disposal of the asset for income tax. 7. Rent revenue collected in advance: accrual basis for accounting, cash basis for income tax. 8. Unrealized loss on investments: FV-NI recognized for accounting, but loss recognized only on disposal of the asset for income tax. 9. Probable and estimable litigation contingency: accrual basis for accounting and cash basis for income tax. 10. Interest received on investments in municipal bonds is not taxable.
Identifying Tax Differences
Listed below are ten separate situations. For each item indicate whether the difference is (1) temporary, creating a
Item
1. Pension fund contributions are less than pension expense for the current year, resulting in a pension liability on the company’s
2. Dividend revenue recognized for accounting while a portion is deductible for taxes (dividends received deduction).
3. Estimated warranty costs: accrual basis for accounting and cash basis for income tax.
4. Fines expensed for accounting but not deductible for tax purposes.
5. Straight-line
6. Unrealized gain on investments: FV-NI recognized for accounting, but gain recognized only on disposal of the asset for income tax.
7. Rent revenue collected in advance: accrual basis for accounting, cash basis for income tax.
8. Unrealized loss on investments: FV-NI recognized for accounting, but loss recognized only on disposal of the asset for income tax.
9. Probable and estimable litigation contingency: accrual basis for accounting and cash basis for income tax.
10. Interest received on investments in municipal bonds is not taxable.
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