1. An example of a permanent tax difference is

a. installment sales

b. depreciation

c. warranty expense

d. interest income on municipal bonds

2. Vested benefits

a. are benefits that an employee is entitled to receive only if he/she remain with the same company.

b. are benefits that an employee is entitled to received even if the he/she terminated employee.

c. are lost if the employee is terminated.

d. None of the above.

3. An example of a deferred tax asset is

a. product warranty liabilities, accrual basis is used for financial reporting and cash basis is used for tax purposes.

b. benefit due to a loss carry/forward.

c. bad debt expense recognized using the allowance method for financial reporting and the direct write-off method for tax purposes.

d. All of the above.

4. At the beginning of 2015, Pitman Co. book depreciation of $220,000. On Pitman Co.s tax return $480,000 of depreciation was reported. Pitman Co.s tax rate is 40% for 2015 and all future years. At the end of 2015, which of the following deferred tax accounts and balances is reported on Pitmans balance sheet?

a. Deferred tax asset $104,000

b. Deferred tax liability $104,000

c. Deferred tax asset $156,000

d. Deferred tax liability $156,000

5. An example of a deferred tax liability is

a. excess depreciation taken for tax purposes.

b. advance rental receipts.

c. municipal bond interest.

d. All of the above.

6. The computation of pension expense includes all of the following except

a. service cost component provided by the actuary.

b. interest on projected benefit obligation.

c. actual return on plan assets.

d. All of these are include in the computation.

7. Taxable income of a corporation

a. can differs from accounting income due to differences in intraperiod allocation between the two methods of income determination.

b. can differs from accounting income due to temporary difference and permanent differences between the two methods of income determination.

c. is based on generally accepted accounting principles.

d. is reported on the corporation's income statement.

8. A major distinction between temporary and permanent differences is

a. temporary differences create deferred tax assets while permanent differences create deferred tax liabilities.

b. temporary differences create deferred tax liabilities while permanent differences create deferred tax assets.

c. temporary differences create deferred tax assets and deferred tax liabilities and permanent differences do not.

d. permanent differences create deferred tax assets and deferred tax liabilities and temporary differences do not.

9. Which of the following will result in a temporary difference?

a. Interest received on municipal bonds

b. Proceeds of life insurance policies

c. Advance rental receipts

d. None of the above

10. Which of the following is not considered a permanent difference?

a. Interest received on municipal bonds.

b. Fines resulting from violating the law.

c. Premiums paid for life insurance on a companys CEO when the company is the beneficiary.

d. Warranty expense.