Differences between book income and taxable income that result in difference between the effective tax rate and the statutory tax rate are known as:

Temporary differences

Short-term differences

Permanent differences

Non-current differences

2)

Which of the following would be expected to occur as the result of a decrease in the corporate income tax rate resulting from a currently enacted tax law?

Changes in rates have no effect on income tax expense

Decrease deferred tax liabilities

Increase deferred tax assets

Both B and C will occur when rates decrease

3)

Which of the following is an example of a permanent difference between pretax GAAP accounting income and taxable income?

Straight-line depreciation is used for book purposes, but accelerated depreciation is used for tax purposes

Warranty expense is recognized in the year of sale for book purposes, but for tax purposes are deductible only when warranty expenditures are made.

Bad debt expense is estimated using an allowance method for book purposes, but the direct write-off method is used for tax purposes.

Interest earned on municipal bonds is tax exempt for federal income tax