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A,B Or C ?? What do I choose in the box? For each item below, indicate whether it involves: A. A temporary difference that will

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A,B Or C ??

What do I choose in the box?

For each item below, indicate whether it involves: A. A temporary difference that will result in future deductible amounts and therefore will usually give rise to a deferred income tax asset. B. A temporary difference that will result in future taxable amounts and therefore will usually give rise to a deferred income tax liability. C. A permanent difference. Use the appropriate number to indicate your answer for each. 1. An accelerated depreciation system is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some plant assets. 2. A landlord collects some rents in advance. Rents received are taxable in the period when they are received. 3. Expenses are incurred in obtaining tax-exempt income. 4. Costs of guarantees and warranties are estimated and accrued for financial reporting purposes. 5. Instalment sales of investments are accounted for by the accrual method for financial reporting purposes and the instalment method for tax purposes. 6. Interest is received on an investment in tax-exempt governmental obligations. 7. For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes, but the assets' lives are shorter for tax purposes. 8. The tax return reports a deduction for 80% of the dividends received from various corporations. The cost method is used in accounting for the related investments for financial reporting purposes. 9. Estimated losses on pending lawsuits and claims are accrued for books. These losses are tax-deductible in the period(s) when the related liabilities are settled. 10. Expenses on share options are accrued for financial reporting purposes. 1 2 3 4 5 6 7 8 9 9 10

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