Question 5 (10 marks) Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences or temporary differences. For temporary differences, indicate whether they will create deferred tax assets or deferred tax liabilities. 1. The tax return reports a deduction for 70% of the dividends received from other companies. The cost method is used in accounting for the related investments for financial reporting purposes. 2. Advance rental receipts. Rents received are taxable in the period when they are received. 3. Fine for polluting. 4. Estimated warranty expenses for financial reporting purposes. 5. Expenses on share options are accrued for financial reporting purposes. 6. Expenses incurred in obtaining tax-exempt income. 7. Estimated losses on pending lawsuits. Such losses are tax-deductible in the period(s) when the related liabilities are settled. 8. The depreciation expense estimated for tax purpose is greater than the depreciation expense estimated for financial reporting purpose. 9. Certain type of credit sales recorded on accrual basis for financial reporting purposes, but recorded on cash basis and deferred for tax purpose. 10. Percentage depletion of natural resources in excess of their cost