Norman, Inc. appropriately uses the asset-liability method to record deferred income taxes. Norman reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purposes and the straight-line basis for financial reporting purposes. The tax deduction is the larger amount this year.
In addition, Norman received rent revenues in advance this year. These revenues are included in this year's taxable income. However, for financial reporting purposes, these revenues are reported as unearned revenues, a current liability.
Initial Post
How would Norman account for the temporary differences?
Norman, Inc. appropriately uses the asset-liability method to record deferred income taxes. Norman reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purposes and the straight-line basis for financial reporting purposes. The tax deduction is the larger amount this year.
In addition, Norman received rent revenues in advance this year. These revenues are included in this year's taxable income. However, for financial reporting purposes, these revenues are reported as unearned revenues, a current liability.
Initial Post
How would Norman account for the temporary differences?
Related questions
| Q2. (6 pts), Assuming constant tax rates, pre-tax book incomeX the tax rate equals ___________________. Taxes paid in cash for the current year is the tax rateX ____________________. |
| Q3 (3 pts). A valuation account is used to: A. reduce a deferred tax liability. B. reduce a deferred tax asset. C. increase a deferred tax liability. D. increase a deferred tax asset. |
Q 4 (10 pts.) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.1 (4 pts.) For each example, indicate whichis higher in the current year, taxable income orpretax income? Assume the company is in its first year ofoperations. (You must get more than three correct to earn credit.)
4.2 (6 pts.) Check only one box for each of thesix items (temporary difference resulting in DTA or DTL; orpermanent difference). Must get more than two correct to getcredit.
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