Question
Indicate whether each of the following independent situations should be treated as a temporary difference or a permanent difference. (a)For accounting purposes, a company reports
Indicate whether each of the following independent situations should be treated as a temporary difference or a permanent difference.
(a)For accounting purposes, a company reports revenue from installment sales on the accrual basis. For income tax purposes, it reports the revenues by the installment-sales method, deferring recognition of gross profit until cash is collected.Permanent DifferenceTemporary Difference
(b)Pretax accounting income and taxable income differ because 80% of dividends received from U.S. corporations was deducted from taxable income, while 100% of the dividends received was reported for financial statement purposes.Permanent DifferenceTemporary Difference
(c)Estimated warranty costs (covering a three-year warranty) are expensed for accounting purposes at the time of sale but deducted for income tax purposes when paid.
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