Question

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences reported first on:

  

	Income Statement		Tax Return
	Revenue	Expense	Revenue	Expense
(1.)	$20,000
(2.)			$20,000
(3.)	$15,000	$20,000
(4.)	$15,000	$20,000		$10,000

Required:

For each situation, determine the taxable income assuming pretax accounting income is $100,000. Show well-labeled computations. You can copy and paste this form into your answer if you like.

	1	2	3	4
Accounting income	$100,000	$100,000	$100,000	$100,000
Temporary differences:
Income statement first:
Revenue
Expense
Tax return first:
Revenue
Expense
Taxable income

Answer 1

Solution:

	1	2	3	4
Accounting income	$100,000.00	$100,000.00	$100,000.00	$100,000.00
Temporary differences:
Income statement first:
Revenue	-$20,000.00		-$15,000.00	-$15,000.00
Expense			$20,000.00	$20,000.00
Tax return first:
Revenue		$20,000.00
Expense				-$10,000.00
Taxable income	$80,000.00	$120,000.00	$105,000.00	$95,000.00