Solved

Match Each Item to Its Descriptive Phrase by Placing the Appropriate

Question 113

Matching

Match each item to its descriptive phrase by placing the appropriate letter in the space provided

Premises:

Responses:

Rent is collected in advance from a tenant. Rent is taxable when received.

permanent difference

Warranty costs are accrued at the time of sale for accounting purposes, but are not deductible until paid for income tax purposes.

temporary difference that will result in future deductible amounts (giving rise to deferred tax assets).

Interest revenue is recorded on municipal bonds.

temporary difference that will result in future taxable amounts (giving rise to deferred tax liabilities).

Installment sales are recognized at the point of sale for accounting purposes, but when the cash is received for income tax purposes.

A loss contingency is expensed for accounting purposes. The company expects to pay the amount involved in three years.

Bad debt expense is estimated for accounting purposes, but is not deducted for income tax purposes until written off.

The company paid a fine from the EPA for violation of environmental regulations

Premises:

Rent is collected in advance from a tenant. Rent is taxable when received.

Warranty costs are accrued at the time of sale for accounting purposes, but are not deductible until paid for income tax purposes.

Interest revenue is recorded on municipal bonds.

Installment sales are recognized at the point of sale for accounting purposes, but when the cash is received for income tax purposes.

A loss contingency is expensed for accounting purposes. The company expects to pay the amount involved in three years.

Bad debt expense is estimated for accounting purposes, but is not deducted for income tax purposes until written off.

The company paid a fine from the EPA for violation of environmental regulations

Responses:

permanent difference

temporary difference that will result in future deductible amounts (giving rise to deferred tax assets).

temporary difference that will result in future taxable amounts (giving rise to deferred tax liabilities).

Correct Answer:

Premises:

Responses:

Rent is collected in advance from a tenant. Rent is taxable when received.

Warranty costs are accrued at the time of sale for accounting purposes, but are not deductible until paid for income tax purposes.

Interest revenue is recorded on municipal bonds.

Installment sales are recognized at the point of sale for accounting purposes, but when the cash is received for income tax purposes.

A loss contingency is expensed for accounting purposes. The company expects to pay the amount involved in three years.

Bad debt expense is estimated for accounting purposes, but is not deducted for income tax purposes until written off.

The company paid a fine from the EPA for violation of environmental regulations

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