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.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...

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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.

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Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively 3. Temporary difference that results in taxable amounts in future years when the related asset or liability is recovered or settled, respectively 4. The future effects on income taxes, as measured by the applicable enacted tax rate and provisions of the enacted tax low, resulting from temporary differences and operating loss carryforwards at the end of the current year 5. The change during the year in a corporations deferred tax liabilities and assets 6. The deferred tax consequences of future taxable amounts 7. The portion of o deferred tax asset for which it is more likely than not that a tax benefit will not be realized 8. Temporary difference that results in deductible amounts in future years when the related asset or liability is recovered or settled, respectively 9. The sum of income tax payable and deferred tax expense (or benefit) 10. The amount of income taxes paid or payable (or refundable) for the current year 11. An excess of tax deductible expenses over taxable revenues in a year that may be carried forward to reduce taxable income in a future year 12. The excess of taxable revenues over tax deductible expenses and exemptions for the year 13. Income tax expense divided by income before income taxes
The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally

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