Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes.
Instructions
For each item below, indicate whether it involves:
1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset.
2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability.
3. A permanent difference.
Use the appropriate number to indicate your answer for each.
(a) ______ The MACRS depreciation system is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some plant assets.
(b) ______ A landlord collects some rents in advance. Rents received are taxable in the period when they are received.
(c) ______ Expenses are incurred in obtaining tax-exempt income.
(d) ______ Costs of guarantees and warranties are estimated and accrued for financial reporting purposes.
(e) ______ Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.
(f) ______ For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes but the assets’ lives are shorter for tax purposes.
(g) ______ Interest is received on an investment in tax-exempt municipal obligations.
(h) ______ Proceeds are received from a life insurance company because of the death of a key officer. (The company carries a policy on key officers.)
(i) ______ The tax return reports a deduction for 80% of the dividends received from U.S. corporations. The cost method is used in accounting for the related investments for financial reporting purposes.
(j) ______ Estimated losses on pending lawsuits and claims are accrued for books. These losses are tax deductible in the period(s) when the related liabilities are settled.
(k) ______ Expenses on stock options are accrued for financial reporting purposes.

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May 15, 2012

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