temporary difference Interest earned on investments in tax-exempt government securities. Interest earned on deposits
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Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification.
A. Non-deductible expenses
B. Non-taxable revenues
C. Deductible temporary difference
D. Taxable temporary difference
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Interest earned on investments in tax-exempt government securities.
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Interest earned on deposits with bank.
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Excess of profit earned over the profit reported under the installment method for income tax purposes.
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- 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 illegallyWhich of the following is not a cause of a difference between pretax financial income and taxable income in a given period? a. operating loss carryforwards b. permanent differences c. applicable tax rates d. temporary differencesClassify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Deductible insurance premiums paid in excess of insurance expense reported for financial reporting. Provision for loss on pending lawsuit expected to be settled during the next reporting period. Insurance premiums paid on life insurance policy where the entity is designated beneficiary. Impairment loss attributed to goodwill. Warranty expense reported for financial reporting purposes in excess of actual costs of repairs done during the period.
- Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Collections of rental in excess of rent revenue reported during the period. Dividends received by a domestic corporation from a domestic corporation. Increase in fair value of equity investments measured at fair value through profit or loss. Uncollectible accounts expense in excess of accounts written off during the period. Tax depreciation in excess of depreciation for accounting purposes.Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Collections of rental in excess of rent revenue reported during the period. Dividends received by a domestic corporation from a domestic corporation. Increase in fair value of equity investments measured at fair value through profit or loss.What events create permanent differences between accounting income and taxable income? What effect do these events have on the determination of income taxes payable and deferred income taxes? Identify three examples of permanent differences between accounting income and taxable income.
- Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes. Which of the following items are of that type? a. Warranty costs b. Goodwill impairment c. Fines d. Entertainment expenses e. Prepaid insuranceWhen accounting standards require recognition of an expense that is not permitted undertax laws, the result is a:A . deferred tax liability.B . temporary diff erence.C . permanent diff erence.Which of the following statements is NOT correct? A. Taxable income and accounting profit may differ due to differences between the recognition of revenue and expenses for tax and accounting purposes. B. Deferred tax assets must be assessed for the probability of their recovery. Creation of a deferred tax asset or liability occurs only if it reverses at some future date. OC. Deferred tax assets and liabilities may arise due to temporary differences between accounting profit and taxable income. D. Deferred tax liabilities may arise due to permanent differences between accounting profit and taxable income.
- 1. Indicate whether the following expenditures are trade or business deductions (T), production of income deductions (PI), personal deductions (P), or are not deductible (X). Also indicate if the deductible expenditures are deductible “for” or “from” AGI. a. Interest expense on business loan b. Expenses incurred in an activity lacking a true profit motive (i.e., a hobby activity) c. Commuting expenses of individual taxpayer d. Rent payments paid by an illegal gambling business e. Payment by a business to bribe a government officialWhich of the following accounts would not be involved in preparing the income statement? Group of answer choices Tax expense All the accounts would be involved in preparing the income statement. Interest income Accumulated depreciation Depreciation expenseSome accountants believe that deferred taxes should not be recognized for certain temporary differences. What is the conceptual basis for this argument? What events create permanent differences between accounting income and taxable income? What effect do these events have on the determination of income taxes payable and deferred income taxes? Identify three examples of permanent differences between accounting income and taxable income.