Temporary and Permanent Differences In the current year, you are calculating a diversified company’s deferred taxes. Based on an analysis of the company’s current taxable income and pretax financial income, you have iden-tified the following items that create differences between the two amounts and that may result in differences between the company’s future taxable income and its future pretax financial income: ________ 1. Percentage depletion deducted for taxes in excess of cost depletion for financial reporting
P18-2 Temporary and Permanent Differences In the current year, you are calculating a diversified company’s
________ 1. Percentage depletion deducted for taxes in excess of cost depletion for financial reporting
_________2. Warranty costs to be deducted for taxes that were deducted as warranty expense for financial reporting
_________3. Gross profit to be recognized for taxes under the completed-contract method that was recognized for financial reporting under the percentage-of-completion method
_________4. Officers’ life insurance premium expense deducted for financial reporting
_________5. Rent revenue to be recognized for financial reporting that was reported for taxes when collected in advance
_________6. Loss from writedown of inventory that was recognized for financial reporting but that will be deducted for taxes when the inventory is sold
_________7. Interest revenue on municipal bonds recognized for financial reporting
_________8. Loss due to
_________9. Gross profit to be recognized under the cash-basis method for tax purposes that was recognized on an accrual basis for financial reporting ________ 10.
________ 11. Investment income that has been recognized under the equity method for financial reporting that will be recognized as fully taxable for tax purposes when dividends are collected
Required:
For each difference, indicate whether it is a temporary difference (T) or a permanent difference (P) by placing the appropriate letter on the line provided. If the difference is a temporary difference, also indicate for the current year whether it will result in a future taxable amount (FT) or a future deductible amount (FD).
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