Ruben

[Ruben]

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Here’s the whole question –

Example: Temporary and permanent differences between taxes payable and income tax expense –

Using the following table, identify the type of difference (taxable temporary, deductible temporary, or permanent), and determine if the difference creates a DTA or a DTL.

                                                 Tax Base                  Carrying Value            Type of Difference          Result

Assets:

Depreciable Equipment               $ 80,000                   $ 90,000

Research and development         $ 50,000                     $ 0

Accounts Receivable                   $ 20,000                    $ 18,500

Municipal Bond Interest              $ 5,000                     $ 5,000

Liabilities:

Customer Advance                      $ 0                           $ 10,000

Warranty Liability                         $ 0                           $ 5,000

Officers’ Life Insurance                $ 0                            $ 0

Note Payable                              $ 30,000                    $ 30,000

Interest                                       $ 0                           $ 0

Now back to my doubts regarding –

1. Officer’s Life Insurance

Tax Base = 0; Carrying Value =
0 (Is this the value of premiums or the cover value, and if its either
of these, how each would be treated in the financial statements for financial as well as tax reporting?)

2. Municipal bond interest earned

Tax
Base = 5,000; Carrying Value = 5,000 (Why is it considered an asset,
when ideally it should appear only on the income statement, I believe its recorded in the balance sheet since carrying value of the asset is given to be $ 5,000)

[Ruben]

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This is an example from Study Session 9 – Income Taxes

[Ruben]

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Hello Everyone, I’m Ruben, IB Researcher from India and planning to take the Dec14 level 1 exam

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