1. Taxable income of a corporation differs from pretax financial income because of Permanent Differences Temporary Differences A) B) C) D) No Yes Yes No Yes Yes No No 2. The deferred tax expense is the A) B) C) D) increase in balance of deferred tax liability minus the increase in balance of deferred tax asset. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability 3. A temporary difference arises when a revenue item is reported for tax purposes in a period After it is reported Before it is reported in financial income in financial income A) B) C) D) Yes Yes No No Yes No No Yes Version 3 Page 1