Question

1. A corporation’s accounting income (financial income/book income) a. does not differ from taxable income due...

1. A corporation’s accounting income (financial income/book income)

a. does not differ from taxable income due to differences in income determination in the current period.

b. may differ from taxable income due to temporary differences between periods.

c. is based on internal revenue rules.

d. is reported on the corporation's tax return.

2. RCo recognizes an expense for tax purposes before it recognizes the expense for financial statement purposes. This is a result of which of the following?

a. Product warranty liability.

b. Prepaid expenses.

c. Subscription revenue received in advance.

d. Advance rental receipts.

Business   Accounting   
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Homework Answers

Answer #1

1. Option (b) is correct

A corporation's accounting income may differ from taxable income due to temporary differences between periods. Temporary differences are differences are differences that originate in the current period and reverse in the later periods.

2. Option (b) is correct

When an expense is recognized for tax purposes before it recognizes the expense for financial statement purposes, then it is due to prepaid expenses. For tax purposes, expenses are reported when paid and for accounting purposes, expenses are reported when incurred. So, prepaid expenses will be reported for tax purposes in earlier year than for accounting purposes.

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