1.
Bob has just completed its first year of operations and has anumber of difference between its pretax financial income andtaxable income. The differences at the end of 2013 are asfollows:
A) Bob recorded $7,000 of interest revenue on municipal bondsduring 2013.
B) $15,000 of installment sales were recognized in income during2013. They are expected to be received during January 2015.
C) Depreciation on machinery totaled $28,000 using straight-linedepreciation for financial statements. Bob's tax accountant record$36,000 of depreciation on the company's tax return.
D) Bill was fined $3,000 for violating certain labor laws during2013. Bill paid the fine during 2013 and agreed to ensure futureviolations would not occur.
E) Drew company agreed to rent space from BOB in 2014. InDecember 2013, Bob received $7,500 from Drew in advance forrent.
F) For 2013, Bob reported $9,500 of warranty expense on itsincome statement. The company's warranty liabilitiy at the end of2013 was $6,250. Bill expects additional warranty costs to be paidin 2014.
Required:
a. For each item, determine if it results in a temporary orpermanent difference. I fthe item results in a temporarydifference, determine if it results in a deffered tax asset ordeferred tax liability.
b. For each item, determine if it initally results in pretaxfinanical income being greater than or less than taxableincome.
1.
Bob has just completed its first year of operations and has anumber of difference between its pretax financial income andtaxable income. The differences at the end of 2013 are asfollows:
A) Bob recorded $7,000 of interest revenue on municipal bondsduring 2013.
B) $15,000 of installment sales were recognized in income during2013. They are expected to be received during January 2015.
C) Depreciation on machinery totaled $28,000 using straight-linedepreciation for financial statements. Bob's tax accountant record$36,000 of depreciation on the company's tax return.
D) Bill was fined $3,000 for violating certain labor laws during2013. Bill paid the fine during 2013 and agreed to ensure futureviolations would not occur.
E) Drew company agreed to rent space from BOB in 2014. InDecember 2013, Bob received $7,500 from Drew in advance forrent.
F) For 2013, Bob reported $9,500 of warranty expense on itsincome statement. The company's warranty liabilitiy at the end of2013 was $6,250. Bill expects additional warranty costs to be paidin 2014.
Required:
a. For each item, determine if it results in a temporary orpermanent difference. I fthe item results in a temporarydifference, determine if it results in a deffered tax asset ordeferred tax liability.
b. For each item, determine if it initally results in pretaxfinanical income being greater than or less than taxableincome.
