Deferred income taxes: temporary or permanent differenceThe asset-liability approach for recording deferred income
taxes is an integral part of generally accepted accounting principles.Instructionsa. Indicate whether each of the following independent
situations should be treated as a temporary difference or as a permanent
difference and explain why.1. A company properly uses the equity method to account for
its 30% investment in another company. The investee pays dividends that are
about 10% of its annual earnings.
2. A company reports a gain on an involuntary conversion of
a nonmonetary asset to a monetary asset. The company elects to replace the
property within the statutory period using the total proceeds so the gain is
not reported on the current year’s tax return.
Recent Comments