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For each item below, indicate whether it involves: A temporary difference that will result in future deductible amounts and therefore will usually give rise to
For each item below, indicate whether it involves:
- A temporary difference that will result in future deductible amounts and therefore will usually give rise to a deferred income tax asset.
- A temporary difference that will result in future taxable amounts and therefore will usually give rise to a deferred income tax liability.
- A permanent difference.
Use the appropriate number to indicate your answer for each.
- 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.
- A landlord collects some rents in advance. Rents received are taxable in the period when they are received.
- Expenses are incurred in obtaining tax-exempt income.
- Costs of guarantees and warranties are estimated and accrued for financial reporting purposes.
- Instalment sales of investments are accounted for by the accrual method for financial reporting purposes and the instalment method for tax purposes.
- Interest is received on an investment in tax-exempt governmental obligations.
- 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.
- 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.
- 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.
- Expenses on share options are accrued for financial reporting purposes.
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