Question $1($Mandatory$)(1$ point$)$

The acceptable balance sheet classifications for deferred tax assets and deferred tax liabilities under GAAP and IFRS are

GAAP IFRS

I. current only noncurrent only

II$.$ current and noncurrent, respectively current and noncurrent, respectively

III. noncurrent only current only

IV$.$ current and noncurrent, respectively noncurrent only

$$

Question $1$ options:

IV

III

I

II

Question $2($Mandatory$)(1$ point$)$

All of the following involve a temporary difference for purposes of income tax allocation except$$

Question $2$ options:

$$expenses or losses that are deducted to compute taxable income prior to the time they are deducted to compute pretax financial income.

$$revenues or gains that are included in taxable income prior to the time they are included in pretax financial income.

$$deductions that are allowed for income tax purposes but that do not qualify as expenses under generally accepted accounting principles.

$$revenues or gains that are included in pretax financial income prior to the time they are included in taxable income.

Question $3($Mandatory$)(7$ points$)$

For each item listed below, indicate whether it involves a:

a$.$ permanent difference.

b$.$ temporary difference that will result in future deductible amounts $($giving rise to deferred tax assets$).$

c$.$ temporary difference that will result in future taxable amounts $($giving rise to deferred tax liabilities$).$

$$

$\_\_\_\_$

$1.$

Rent is collected in advance from a tenant. Rent is taxable when received.

$\_\_\_\_$

$2.$

Warranty costs are accrued at the time of sale for accounting purposes, but are not deductible until paid for income tax purposes.

$\_\_\_\_$

$3.$

Interest revenue is recorded on municipal bonds.

$\_\_\_\_$

$4.$

Installment sales are recognized at the point of sale for accounting purposes, but when the cash is received for income tax purposes.

$\_\_\_\_$

$5.$

A loss contingency is expensed for accounting purposes. The company expects to pay the amount involved in three years.

$\_\_\_\_$

$6.$

Bad debt expense is estimated for accounting purposes, but is not deducted for income tax purposes until written off.

$\_\_\_\_$

$7.$

The company paid a fine from the EPA for violation of environmental regulations.

$$

Required:

Match each item to its descriptive phrase by placing the appropriate letter in the space provided.

Question $3$ options:

Question $4($Mandatory$)(1$ point$)$

In accounting for income taxes, percentage depletion in excess of cost depletion is an example of

Question $4$ options:

intraperiod income tax allocation.

a temporary difference.

a permanent difference.

interperiod income tax allocation.

Question $5($Mandatory$)(1$ point$)$

Each of the following can result in a temporary difference between pretax financial income and taxable income except

Question $5$ options:

product warranty costs.

percentage depletion in excess of cost depletion on wasting assets.

depreciation expense.

contingent liabilities.

Question $6($Mandatory$)(1$ point$)$

Permanent differences impact

Question $6$ options:

deferred tax assets.

current tax liabilities.

deferred tax liabilities.

current deferred taxes.

Question $7($Mandatory$)(1$ point$)$

Interperiod income tax allocation is based on the assumption that

Question $7$ options:

permanent differences ultimately reverse and require interperiod tax allocation.

the amount of income tax expense reported on the income statement should be the same as the income tax obligation on the corporation's income tax return.

permanent differences do not have deferred tax consequences.

total income tax expense should be apportioned among numerous line items on the income statement.

Question $8($Mandatory$)(1$ point$)$

When Congress changes the tax laws or rates, a corporation's deferred tax liability and asset accounts

Question $8$ options:

are adjusted as of the beginning of the year in which the change occurred.

are adjusted using the average of the old and new tax rates.

are not adjusted.

are adjusted as of the end of the year in which the change occurred.

Question $9($Mandatory$)(1$ point$)$

Which one of the following would require interperiod tax allocation?

Question $9$ options:

interest on state municipal bonds

investment income recognized by the equity method for accounting purposes but as income when received for tax purposes

premiums paid on a life insurance policy of which the company is the beneficiary

percentage depletion in excess of cost depletion

Question $10($Mandatory$)(1$ point$)$

Which of the following would not result in a permanent difference between pretax financial income and taxable income?

Question $10$ options:

Percentage depletion in excess of cost depletion on wasting assets

Interest revenue received from investments in municipal bonds

Premiums paid for life insurance policies on officers of the company

Product warranty costs