D. Indicate and explain whether each of the following independent situations should be treated as temporary difference or a permanent difference.

i. Estimated warranty costs (covering a three-year period) are expensed for accounting purposes when incurred. Temporary ?

ii. Depreciation for accounting and income tax purposes differs because of different bases of carrying the related property. The different bases are a result of a business combination treated as a purchase for accounting purposes and as a tax-free exchange for income tax purposes. Temporary?

iii. A company properly uses the equity method to account for its 30% investment in another company. The investee pays dividends that are about 10% of its annual earnings. Permanent?

E. For each of the preceding independent situations, determine whether the situations that are treated as temporary differences will result in future taxable amounts or future deductible amounts and whether they will result in deferred tax assets or deferred tax liabilities. Explain.