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 differenceUse the appropriate number to indicate your answer for each.A. For some assets, straight-line depreciation is used for tax purposes while double-declining balance method is used for financial reporting purposes.B. Warranty expenses are accrued when the sale is made, but cannot be deducted until the work is actually completed.C. The company uses the percentage of completion method to record revenue on long-term contracts for financial reporting purposes, but the completed contract method is used for tax purposes.D. Accelerated depreciation is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes, for some equipment.E. A landlord collects some rents in advance. Rents received are taxable in the period when they are received.F. Tax-exempt income.G. An SEC fine related to financial reporting.H. For financial reporting purposes, an estimated loss from a lawsuit is accrued. The tax return will not report a deduction until an amount is paid.I. A liability for a guarantee is accrued for financial reporting purposes.J. Installment sales are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.

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Answered: A. For some assets, straight-line…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using WORKSHEET that is provided, indicate for each of the statements whether it is True (T) or False (F) according to NZ IAS 12. If the statement is false, rewrite the statement to make it true. If the statement is true, you do not need to explain. Worksheet Item T/F (a) Information: A company has recorded $1m goodwill on the balance sheet. For tax purposes, goodwill impairment is never allowed as a deductible expense. Statement: Therefore, the tax base of the goodwill is $1m. Rewrite Statement:
Which depreciation method is most common for financial reporting? Which depreciation method is most common for tax reporting? Why do companies choose these methods?
Which of the following temporary differences will most likely result in a deferred tax liability O Depreciating a new asset using units of production for GAAP and straight line for tax O Collecting rental income in advance O Sales with multiple obligations delivered and paid for over multiple periods O Paying utility bills in advance A
Recording and Reporting Multiple Temporary Differences The records of Cross Corporation provided the following income tax allocation data. Taxable income Depreciation expense Bad debt expense Pretax GAAP income Required • The depreciation adjustment results from a difference between the GAAP basis and tax basis of depreciable equipment. • The bad debt expense adjustment results from a difference between the GAAP basis and tax basis of net accounts receivable. o The deferred tax accounts have a zero balance at the start of 2020. Tax rate is 25%. a. Journal Entries a. Record the income tax journal entry on December 31, 2020. b. Record the income tax journal entry on December 31, 2021. c. Record the income tax journal entry on December 31, 2022. d. Record the income tax journal entry on December 31, 2023. • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. • Note: If the journal entry includes an extra…
In computing net business income for income tax purposes, which of the following statements is INCORRECT? Question 3Answer a. Income tax paid is not allowed as a business deduction. b. Depreciation is not allowed as a business deduction. c. Capital cost allowance is not allowed as a business deduction. d. An arbitrary reserve is not allowed as a business deduction.
1. Directly attributable costs include:I. Interest Expense when the asset is ready for useII. Value-added taxes, the entity is not VAT-registered a. I onlyb. II onlyc. Both I and IId. Neither I nor II2. Computation of maximum dividend of wasting asset corporations include the following, except: I. Appropriated retained earningsII. Realized portion of accumulated depletiona. I onlyb. II onlyc. I and IId. None from I and IIPLEASE ADD REFERENCE FOR ANSWERPS: NOT SATISFIED WITH THE ANSWER OF LAST TUTOR
What is the accounting treatment for discontinued operations? A : It is reported at its gross amount as an "other revenue or gain" or "other expense or loss". B : It is reported as an "other revenue or gain" or "other expense and loss", net of tax. C : It only needs to be disclosed in the footnotes of the financial statements. D : It may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss).
When a company records a deferred tax asset, it may need to also report a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized. Required:Access the FASB Accounting Standards Codification at the FASB website. What is the specific nine-digit Codification citation (XXX-XX-XX-XX) that describes the guidelines for determining the disclosure requirements pertaining to how a firm should determine whether a valuation allowance for deferred tax assets is needed?
Subject :accounting
When percentage-of-completion accounting is not appropriate, U.S. GAAP requires the use of the completedcontract method, while IFRS requires the use of the cost recovery method. Explain how the two methods affectrecognition of revenue, cost of construction, and gross profit over the life of a profitable contract.
A company determines that it is more likely than not that a portion of a deferred tax asset will not be realized. Due to the value of the beginning of the period balance, this determination caused a valuation allowance account to decrease during the current period. This situation will cause Income Tax Expense to decrease. O True O False
8.All of the following components are shown in the income statement net of applicable income taxes EXCEPT Group of answer choices A.cumulative effect of a change in accounting principle. B.extraordinary gain or loss. C.discontinued operations. D.gain or loss on sale of plant assets.

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