Chapter 16, Problem 16.2DMP

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently, the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred tax asset

When the Income Tax Expense account i.e. the estimated income tax amount is more than the outstanding amount of income tax i.e. the Income Tax Payable account, the difference is to be debited to Deferred Tax Asset account.

To explain: How might many companies also report higher assets as a result of GAAP for postretirement plans

2.

To determine

To explain: Thelimitation of discounting deferred tax amounts to their present values.