Of the following temporary differences, which one ordinarily creates a deferred tax asset?
Accrued warranty expense
. Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset’s life creates a: Deferred tax liability.
Which temporary difference would result in a deferred tax asset?
If the temporary difference is positive, a deferred tax liability will arise. If the
temporary difference is negative
, a deferred tax asset will arise.
What creates a deferred tax asset?
Understanding Deferred Tax Assets
A deferred tax asset is often created
when taxes are paid or carried forward but cannot yet be recognized on the company’s income statement
. … While the business no longer has the cash on hand, it does have its comparable value, and this must be reflected in its financial statements.
Which of the following difference between financial accounting and tax accounting ordinarily creates a deferred tax asset?
Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?
Revenue collected in advance
. Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes: An increase in a deferred tax asset.
Which of the following creates a temporary difference between financial income and taxable income?
Which of the following creates a permanent difference between financial income and taxable income? … creating
a deferred tax asset
. All of the following can result in a temporary difference between pretax financial income and taxable income except for. payment of premiums for life insurance.
What are some examples of permanent and temporary differences?
Temporary differences occur whenever there is a difference between the tax base and the carrying amount of assets and liabilities on the balance sheet.
Permanent differences are differences between the tax and financial reporting of revenue or expense items
that will not be reversed in future.
What is the journal entry for deferred tax liability?
The book entries of deferred tax is very simple. We have to create Deferred Tax
liability A/c or Deferred Tax Asset A/c by debiting or crediting Profit & Loss A/c
respectively. The Deferred Tax is created at normal tax rate.
What is an example of a deferred expense?
Rent payments received in advance or annual subscription payments received at the beginning of the year
are common examples of deferred revenue. Deferred expenses, also called prepaid expenses or accrued expenses, refer to expenses that have been paid but not yet incurred by the business.
How do I know if I have deferred tax assets?
A deferred tax asset is recognised for
all deductible temporary differences to the extent that
it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.
How is deferred tax calculated?
It is calculated as
the company’s anticipated tax rate times the difference between its taxable income and accounting earnings before taxes
. Deferred tax liability is the amount of taxes a company has “underpaid” which will be made up in the future.
What is one way that a temporary difference between taxable income and financial income can become a deferred tax asset or liability?
The temporary differences
all result from differences between taxable income and pretax financial income
which will reverse and result in taxable or deductible amounts in future periods.
What amounts should be disclosed for deferred taxes on the balance sheet at year end?
What amounts should be disclosed for deferred taxes on the balance sheet at year-end?
Deferred tax assets current should be netted against deferred tax liabilities current
. Regina corp. is in its third year of operations and has a net loss of $100,000.
What are the positive aspects of taxation?
Reducing marginal tax rates on wages and salaries
, for example, can induce people to work more. Expanding the earned income tax credit can bring more low-skilled workers into the labor force. Lower marginal tax rates on the returns to assets (such as interest, dividends, and capital gains) can encourage saving.
What are examples of temporary differences?
Temporary differences arise when business income or expenses are recognized in different periods on the financial statements than on the tax returns. These differences might include
revenue recognition, expenses incurred but not yet paid or depreciation calculation differences
, reports Finance Train.
What are examples of permanent differences?
Five common permanent differences are
penalties and fines, meals and entertainment, life insurance proceeds, interest on municipal bonds, and the special dividends received deduction
. Penalties and fines. These expenses occur when a business breaks civil, criminal, or statutory law (and gets caught!).
What are timing differences in accounting?
Timing differences are
the intervals between when revenues and expenses are reported for financial statement and income tax reporting purposes
. … When there are timing differences, the amount of reported taxable income could vary significantly from the amount reported on the income statement.
