1. Which statement is true about intraperiod tax allocation?
a. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return
b. It is required for the cumulative effect of accounting changes but not for prick period adjustments
c. The purpose is to allocate income tax expense evenly over a number of accounting periods
d. The purpose is to relate the income tax expense to the items which affect the amount of tax
2. Which temporary difference would result in a deferred tax asset?
a. Tax penalty or surcharge
b. Dividend received on share investment
c. Excess tax depreciation over accounting depreciation
d. Rent received in advance included in taxable income but deferred for financial accounting
3. Which temporary difference would result in a deferred tax liability?
a. Interest revenue on municipal bonds
b. Accrual of warranty expense
c. Excess tax depreciation over financial depreciation
d. Subscription revenue received in advance
Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.
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