Question

For each of the hypothetical circumstances listed below, determine whether the difference between book and tax records represents a temporary timing difference resulting in either a deferred tax asset or a liability or represents a permanent timing difference. Also determine how each difference would be classified on the financial statements (current or non-current). Click on each cell and select from the list provided.

Options to pick from:

Temporary timing difference, asset, current

Temporary timing difference, asset, non-current

Temporary timing difference, liability, current

Temporary timing difference, liability, non-current

Permanent difference, no financial statement presentation

Permanent difference, asset, non-current

Permanent difference, liability, non-current

1. For plant assets, the depreciation expense deducted for tax purposes is in excess of the depreciation expense used for financial reporting purposes

2. A landlord collects some rents in advance. Rents received are taxable in the period in which they are received.

3. Interest is received on an investment in tax-exempt municipal obligations.

4. Cost of one year warranties are estimated and accrued for financial reporting purposes.

5. A company elects to prepay its liability insurance for a one year period that overlaps its balance sheet date.

6. A parent corporation accounts for an investment in a subsidiary using the equity method of accounting. Undistributed earnings will be paid over multiple years beginning more than-year from the balance sheet.

7. Start up company incur significant organizational costs in the first year of operation.

8. Charisma Corp. pays premium on key man life insurance for its charmastic CEO.

Answer 1

1	temporary timing difference, liability, non-current
2	temporary timing difference, asset, current
3	permanent difference, no financial statement presentation
4	temporary timing difference, asset, current
5	temporary timing difference, liability, current
6	Permanent difference, liability, non-current
7	Temporary timing difference, asset, non-current
8	Permanent difference, asset, non-current