A temporary difference arises when a deductible revenue item is reported for tax purposes in a period

After it is reported in financial income Before it is reported in financial income

A. Yes Yes

B. Yes No

C. No Yes

D. No No

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At the December 31, 2017 balance sheet date, Earls Court Corporation reports an accrued receivable for financial reporting purposes but not for tax purposes. When this asset is recovered in 2018, a future taxable amount will occur and

A. pretax financial income will exceed taxable income in 2018.

B. Earls Court will record an increase in a deferred tax asset in 2018.

C. total income tax expense shown on the income statement for 2018 will exceed income tax payable for 2018 (all else equal).

D. Earls Court will record a decrease in a deferred tax liability in 2018.

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Assuming a 40% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet?

I. A revenue is deferred for tax purposes but not for financial reporting purposes.

II. A revenue is deferred for financial reporting purposes but not for tax purposes.

III. An expense is deferred for financial reporting purposes but not for tax purposes.

IV. An expense is deferred for tax purposes but not for financial reporting purposes.

A. Item II only B. Items I and III only C. Items II and III only D. Items I and IV only

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An item that would create a permanent tax difference for a U.S. corporation would be:

A. Making installment sales during the year

B. Using the U.S. Internal Revenue Services accelerated depreciation schedules (MACRS Modified Accelerated Cost Recovery System) for tax purposes and straight-line depreciation for book purposes

C. A balance in the Unearned Rent account at year end

D. A fine resulting from violating pollution laws and regulations