Income taxes

Question 1

What are permanent differences for financial statement income versus taxable income? (3 items)

Answer 1

Items of revenue or expense that are:
(a) nontaxable,
(b) nondeductible,
(c) or special tax allowances

Question 2

What are temporary differences for financial statement income versus taxable income?

Answer 2

They enter into pretax financial income in a period before OR a period after they enter into taxable income
- affect the deferred tax computation
- affect a liability (for future taxable amts) or an asset (for future deductible amts)

Question 3

What is a deferred tax liability

Answer 3

Occurs when a temporary difference results in LESS taxes paid now and MORE taxes owed in the future

Question 4

What is a deferred tax asset

Answer 4

Occurs when a temporary difference results in MORE taxes paid now and LESS taxes owed in the future