4. A major distinction between temporary and permanent differences is permanent differences are not representative of acceptable accounting practice. temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse A) B) C) once an item is determined to be a temporary difference, it maintains that status D) temporary differences occur frequently, whereas permanent differences occur only however, a permanent difference can change in status with the passage of time. once 5. Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? A) Interest received on a municipal obligation. B) Subscriptions received in advance. C) Prepaid royalty received in advance. D) An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes 6. Which of the following differences would result in future taxable amounts? A) Expenses or losses that are tax deductible before they are recognized in financial B) Revenues or gains that are recognized in financial income but are never included in C) Expenses or losses that are tax deductible after they are recognized in financial D) Revenues or gains that are taxable before they are recognized in financial income. income taxable income. income. 7. An example of a permanent difference is A) interest expense on money borrowed to invest in municipal bonds. B) insurance expense for a life insurance policy on officers. C) proceeds from life insurance on officers. D) all of these 8. Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on A) their expected reversal dates. B) their debit or credit balance. C) the classification of the related asset or liability D) the length of time the deferred tax amounts will generate future tax d benefits