Temporary Difference Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference. To explain: The balance sheet account for which a temporary difference is created here.

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Answer 1

Question

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

4.

To determine

To classify: The deferred tax amount in the balance sheet.

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I need help with this general accounting question using the proper accounting approach.

Space Exploration Technology Corporation (Space X), is an aerospace manufacturer that sells stock engine components and tests equipment for commercial space transportation. A new customer has placed an order for eight high-bypass turbine engines, which increase fuel economy. The variable cost is $1.6 million per unit, and the credit price is $1.725 million each. Credit is extended for one period, and based on historical experience, payment for about one out of every 200 such orders is never collected. The required return is 1.8% per period.  Required Assuming that this is a one-time order, should it be filled? The customer will not buy if credit is not extended. What is the break-even probability of default in part 1? Suppose that customers who don’t default become repeat customers and place the same order every period forever. Further assume that repeat customers never default. Should the order be filled? What is the break-even probability of default?

Can you explain the correct methodology to solve this general accounting problem?

Answer 2

Question

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

4.

To determine

To classify: The deferred tax amount in the balance sheet.

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Answer 3

Question

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

4.

To determine

To classify: The deferred tax amount in the balance sheet.

Expert Solution & Answer

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Answer 4

Question

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

4.

To determine

To classify: The deferred tax amount in the balance sheet.

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Answer 5

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

4.

To determine

To classify: The deferred tax amount in the balance sheet.

Answer 6

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

Answer 7

Chapter 16, Problem 16.2P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

To explain: The balance sheet account for which a temporary difference is created here.

Answer 8

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

Answer 9

2.

To determine

To indicate: the cumulative amount of temporary difference at year end.

Answer 10

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

Answer 11

3.

To determine

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

Answer 12

4.

To determine

To classify: The deferred tax amount in the balance sheet.

Answer 13

4.

To determine

To classify: The deferred tax amount in the balance sheet.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 16 - Prob. 16.1Q Ch. 16 - A deferred tax liability (or asset) is described...Ch. 16 - Prob. 16.3Q Ch. 16 - Prob. 16.4Q Ch. 16 - Temporary differences result in future taxable or...Ch. 16 - Identify three examples of differences with no...Ch. 16 - The income tax rate for Hudson Refinery has been...Ch. 16 - Suppose a tax reform bill is enacted that causes...Ch. 16 - A net operating loss occurs when tax-deductible...Ch. 16 - Prob. 16.10Q

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To indicate: the cumulative amount of temporary difference at year end.

The balance in the related deferred tax account at the end of the year and to indicate whether it is deferred tax asset or liability.

To classify: The deferred tax amount in the balance sheet.

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