For Each of the Following Differences Between the Amount of Taxable

question 83

Essay

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet. Treat each item independently of the others. Assume a tax rate of 25%.

---

Definitions:

Retained Earnings

The part of net earnings kept by the company instead of being paid out to its shareholders in the form of dividends.

Stock Dividend

A dividend payment made to shareholders in the form of additional shares, rather than cash, based on the proportion of shares already held.

Common Stock

A type of equity security that represents ownership in a corporation, giving shareholders the right to vote on corporate matters and receive dividends.

Dividend Payable

A liability reported on a company's balance sheet for dividends declared by the board of directors but not yet paid out to shareholders.