Part 1: Multiple Choice

1. A future deductible item arises when a revenue activity is reported for tax purposes in a period

After it is reported Before it is reported

in financial income in financial income

a. Yes Yes

b. Yes No

c. No Yes

d. No No

2. Which of the following differences would result in future taxable amounts?

a. Expenses or losses that are tax deductible after they are recognized in financial income.

b. Revenues or gains that are taxable after they are recognized in financial income.

c. Expenses or losses that are tax deductible before they are recognized in financial income.

d. Both (a) and (b) will result in future taxable amounts.

e. Both (b) and (c) will result in future taxable amounts

3. Which of the following temporary differences results in a deferred tax asset (future deductible) in the year the temporary difference originates?

I. Accrual for product warranty liability.

II. Subscriptions received in advance.

III. Equity method for long-term investments.

a. I and II only.

b. II only.

c. III only.

d. I and III only.

e All of the above answers (I, II, and III) will result in a deferred tax asset in the year of origination