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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Temporary differences result in future taxable or deductible amounts when the related asset or liability is recovered or settled. Some differences, though, are not temporary. What events create permanent differences? What effect do these have on the determination of income taxes payable? Of
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- Explain why permanent differences have no deferred tax consequences.arrow_forwardOf the following temporary differences, which one ordinarily creates a deferred tax asset? O Installment sales for tax reporting. O Fines paid for violation of law. O Prepaid expenses. O Estimated warranty expense.arrow_forwardHow might a reduction in future tax rates affect deferred tax assets in a way that reduces current net income?arrow_forward
- 20. A temporary difference arises when a revenue item is reported for tax purposes in a period After it is reportedin financial income Before it is reportedin financial income No Yes No No Yes No Yes Yesarrow_forwardAn unused tax loss will arise when: a. Expenses deductible for tax purposes are less than the taxable income b. Expenses deductible for tax purposes exceeds the taxable income. c. Expenses deductible for tax purposes are equal to the taxable income d. Expenses deductible for tax purposes do not exist.arrow_forward1 contiune 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. (e) Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.(f) 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.(g)…arrow_forward
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