$1.$ Circle or highlight the correct answer. Deferred income taxes for a company will only result when: $(1$ point$)$

A$.$ Taxable income is different than accounting basis income as a result of a temporary timing difference.

B$.$ Accounting basis income is different than taxable income as a result of a permanent difference.

C$.$ Carrying back a loss for $2$ years to receive a refund for income taxes paid during the prior $2$ years.

D$.$ All of the above.

$2.$ Circle or highlight the correct answer. The total income tax provision on the regular income statement is always based on

the applicable income tax rate and: $(1$ point$)$

A$.$ The taxable income.

B$.$ The difference between accounting basis income and taxable income.

C$.$ The accounting basis income.

D$.$ None of the above.

$3.$ Circle or highlight the correct answer. A balance sheet that contains a deferred tax asset may be a signal indicating: $(1$

point$)$

A$.$ The company$$s income tax strategy is good.

B$.$ Nothing at all.

C$.$ The company$$s income tax strategy is suspect.

D$.$ The company$$s accounting basis income is greater than its taxable income.

$4.$ Circle or highlight the correct answer. The current amount of income tax the company owes the IRS and the applicable

state taxing agency is: $(1$ point$)$

A$.$ The deferred income tax provision on the regular income statement and the current income tax liability on the

balance sheet.

B$.$ The current income tax provision on the regular income statement and the deferred income tax liability on the

balance sheet.

C$.$ The deferred asset on the balance sheet and the deferred income tax provision on the regular income statement.

D$.$ The current income tax liability on the balance sheet and the current income tax provision on the regular income

statement.

$5.$ Circle or highlight the best answer. Concerning deferred income taxes: $(1$ point$)$

A$.$ A company prefers an increase in a deferred tax asset because it is a use of cash.

B$.$ A company prefers an increase in a deferred tax liability because it is a source of cash.

C$.$ A company has no preference between a deferred tax liability and a deferred tax asset.

D$.$ Only results when accounting basis income is greater than taxable income.

$6.$ Sanchez Co$.$ reported accounting basis income of $$100,000$ on its regular income statement which included a $$30,000$

warranty expense. However, due to IRS regulations, Sanchez could only deduct $$20,000$ of the warranty expense on its

current year income tax return $($taxable income$).$ The rest of the $$10,000$ will be deductible on Sanchez$$s income tax

return next year. Assuming a $20\%$ tax rate, which of the following items would show up Sanchez$$s current year financial

statements $[$circle or highlight$]?(3$ points$)$

A$.$ A $$20,000$ total income tax provision on the regular income statement, a $$16,000$ current tax liability on the

balance sheet and a $$4,000$ deferred tax liability on the balance sheet.

B$.$ A $$20,000$ total income tax provision on the regular income statement, a $$22,000$ current tax liability on the

balance sheet and a $$2,000$ deferred tax asset on the balance sheet.

C$.$ A $$22,000$ total income tax provision on the regular income statement, a $$20,000$ current tax liability and $$2,000$

deferred liability on the balance sheet.

CHAPTER $3$ ASSIGNMENTS $|$ PAGE $2$

D$.$ None of the above