3. A company receives advance payments from customers that are immediately taxab

Question

3. A company receives advance payments from customers that are immediately taxable but will not be recognized for accounting purposes until the company fulfils its obligation. The company will most likely record: A) a deferred tax asset B) a deferred tax liability C) no deferred tax asset or liability Which of the following does not result in a deferred tax item? A) 4. A permanent difference between tax reporting and financial reporting A B) rary difference resulting from differences between cash and accrual accounting tempo temporary difference arising from differences in depreciation meth C) A ods between tax reporting and financial reporting A firm incurred $75,000 of research and development (R&D;) in the current year. According to accounting standards, the firm expensed the entire amount in its income statement for the year. The tax returns, however, require the R&D; to be capitalized and amortized on a straight-line basis over three years. The firm will most likely record: A) a deferred tax asset B) a deferred tax liability C) no deferred tax asset or liability 5.

Explanation / Answer

3. A) Diferred Tax Asset

Tax is paid early so there will be diferred tax asset

4. A) A permanent difference between tax reporting and financial reporting

5. B) Diferred tax asset

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