Indicate and explain whether each of the following independentsituations should be treated as a temporary difference or apermanent difference.
(a) For accounting purposes, a company reports revenue frominstallment sales on the accrual basis. For income tax purposes, itreports the revenues by the installment method, deferringrecognition of gross profit until cash is collected.
(b) Pretax accounting income and taxable income differ because80% of dividends received from U.S. corporations was deducted fromtaxable income, while 100% of the dividends received was reportedfor financial statement purposes.
(c) Estimated warranty costs (covering a three-year warranty)are expensed for accounting purposes at the time of sale butdeducted for income tax purposes when paid.
Indicate and explain whether each of the following independentsituations should be treated as a temporary difference or apermanent difference.
(a) For accounting purposes, a company reports revenue frominstallment sales on the accrual basis. For income tax purposes, itreports the revenues by the installment method, deferringrecognition of gross profit until cash is collected.
(b) Pretax accounting income and taxable income differ because80% of dividends received from U.S. corporations was deducted fromtaxable income, while 100% of the dividends received was reportedfor financial statement purposes.
(c) Estimated warranty costs (covering a three-year warranty)are expensed for accounting purposes at the time of sale butdeducted for income tax purposes when paid.
