Which of the Following Is an Example of a Temporary

question 90

Multiple Choice

Which of the following is an example of a temporary difference,which could result in a deferred tax asset?

• A) Gain on disposal of an asset when included in taxable income before it is included in pre-tax accounting income
• B) Use of straight-line depreciation for accounting purposes and an accelerated rate for income tax purposes
• C) Gross margin on instalment sales is recognized for accounting purposes before it is included in taxable income in the income tax return
• D) Prepayments of expenses in year of payment; recognition of expense for accounting purposes occurs in a later year.

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Definitions:

Unamortized Premium

The portion of a bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Wholly Owned Subsidiary

A company whose entire share capital is owned by another company, making it fully controlled by the parent company.

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income.

Unamortized Premium

The portion of the bond premium that has not yet been expensed in the income statement through amortization.