Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a: a. Future deductible amount b. Permanent difference not requiring inter-period tax allocation c. Deferred tax asset d. Deferred tax liability

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a: a. Future deductible amount b. Permanent difference not requiring inter-period tax allocation c. Deferred tax asset d. Deferred tax liability

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...

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Question

provide correct and short answer. General Account

Using straight-line depreciation for financial reporting
purposes and MACRS for tax purposes in the first year
of an asset's life creates a:
a. Future deductible amount
b. Permanent difference not requiring inter-period tax
allocation
c. Deferred tax asset
d. Deferred tax liability

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Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. Code Letter Term Code Letter Term A. Future deductible amount H Deferred tax consequences B Income tax payable (or refund) I Future taxable amount Operating loss carryback Deferred tax liability D Valuation allowance K Temporary difference E Deferred tax asset Income tax expense (or benefit) F Operating loss carryforward M Deferred tax expense (or benefit) Taxable income Required: Indicate which term belongs with each definition by choosing the correct term. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively X 3. Temporary…
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Explain how the following transactions result in taxable /deductible temporarydifference:a. Interest revenue. (3 marks)b. Depreciation. (3 marks)c. Development costs. (3 marks)d. Retirement benefit costs. (3 marks)e. Research costs. (3 marks)