Financial Accounting 3

FINANCIAL ACCOUNTING III – ACCT 3018

ASSIGNMENT 1
DUE :
TOTAL MARKS = 50

QUESTION 1
Marks=10
Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences OR temporary differences. For temporary differences, indicate whether they will create future tax assets or future tax liabilities

1. Advance rental receipts
Temporary difference, deferred tax asset

2. Membership costs in a health club
Permanent difference

3. Estimated future warranty costs
Temporary difference, deferred tax asset

4. Excess of contributions over pension expense
Temporary difference, deferred tax liability

5. Expenses incurred in obtaining tax-exempt revenue
Permanent difference

6. Instalment sales
Temporary difference, deferred tax liability

7. Excess CCA over accounting amortization
Temporary difference, deferred tax liability

8. Long term construction contracts
Temporary difference, deferred tax liability

9. Premiums paid on life insurance of offices (company is the beneficiary)
Permanent difference

10. Interest penalty for late submission of income tax balance
Permanent difference

QUESTION 2
Marks=3
There are four types of temporary differences. For each type (1) indicate the cause of the difference (2) give an example and (3) indicate whether it will create a taxable or deductible amount in the future.

(1) Revenues or gains are taxable after they are recognized in pretax financial income. Examples is installment sales, it results in future taxable amounts.

(b) Revenues or gains are taxable before they are recognized in pretax financial income. Examples is prepaid rent, it results in future deductible amounts.

(c) Expenses or losses are deductible before they are recognized in pretax financial income. Example is prepaid expenses, it results in future taxable amounts.

(d) Expenses or losses are deductible