For each of the following items indicate the following:

i. Is the item a reversing (timing) difference or a permanent difference?

ii. If it is a reversing difference will it usually give rise to a deferred tax asset or deferred tax liability

iiiWill the amount in the current year be added to or deducted from accounting income to arrive at taxable income?

[Note: the answer can be set up in table format and attached to assignment]

a. Straight-line depreciation is used for equipment with a useful life of 10 years; for tax purposes, the CCA

declining-balance method is used with a rate of 20%

b. A landlord collects rents in advance. Rents are taxable in the period when they are received

c. The company expenses the annual costs for a box at the Air Canada Centre where it entertains potential andexisting customers. These expenses are not deductible for tax purposes.

d. Guaranty and warranty costs are estimated and accrued for financial reporting purposes

e. Installment sales are accounted for by the accrual method for financial reporting and the cash basis for

tax

f. Pension expense is reported on the income statement before it is funded. Pension costs are deductible onlywhen they are funded.

g. Proceeds are received from a life insurance company because of the death of a key officer (the company

carries a policy on key officers)

h. The company reports dividends received from taxable Canadian corporations as investment income on

its income statement even though the dividends are non-taxable

i. Estimated losses on pending lawsuits and claims are accrued for financial reporting purposes. These lossesare tax deductible in the period(s) when the related liabilities are settled.

j. Unrealized gains are recognized in income for investments classified as FV-NI but are not taxable until theinvestments are sold and the gains realized.

k. An impairment loss is recorded for goodwill in the current accounting period