Part 1: Match the term with the appropriate income taxes related definition.

Term Definition

Timing difference: _______ A. Taxable income higher than pretax financial incomein the future

Taxable income: _______ B. Organization responsible for the Internal Revenue Code

FASB: _______ C. Amount that reduces income taxes payable

Deduction: _______ D. Reported U.S. GAAP revenues or expenses are not the same amounts as reported tax income or tax deductions

IRS: _______ E. Taxable income lower than pretax financial incomein the future

Future taxable amounts: _______ F. Amount that increases income tax payable

Future deductible amounts: _______ G. Organization responsible for U.S. GAAP

Part 2: Match the term with the appropriate income taxes related definition.

Term Definition

Deferred tax asset: _______ A. A contra-asset that reduces a deferred tax asset

Deferred tax liability: _______ B. Book-tax differences that reverse in future years

Valuation allowance account: _______ C. An Internal Revenue Code benefit that allows taxpayers to spread-out their losses to prior and/or future years

Permanent difference: _______ D. A future tax benefit that indicates future taxes will be decreased because of a temporary book-tax difference

Temporary difference: _______ E. Reporting continuing income items at gross pre-tax and nonrecurring items at net after-tax

Net operating loss: _______ F. A future tax obligation that indicates future taxes will be increased because of a temporary book-tax difference

Intraperiod tax allocation: _______ G. Book-tax differences that do not reverse in future years

Part 3: Match each accounting transaction with the appropriate definition. Each definition may be used more than one time. Assume U.S. GAAP for financial statement purposes and Internal Revenue Code for tax purposes.

Accounting Transaction Definition

Cash basis sales receipts: _______ A. Transactions that result in a taxable amount in the future (i.e., future tax obligation ~ deferred tax liability)

Litigation accruals: _______

Depreciable property: _______ B. Transactions that result in a deductible amount in the future (i.e., future tax benefit ~ deferred tax asset)

Municipal bond interest received: _______

Advanced rental receipts: _______ C. Transactions that result in a permanent difference

Fines paid for breaking the law: ________

Product warranty liabilities: _________