CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following items would require the recognition of a deferred tax asset or liability?

I. Interest expense incurred on funds borrowed to acquire tax-exempt state government bonds
II. Bad debts expense determined by the direct write-off approach for tax purposes but calculated by the allowance approach for financial accounting purposes
III. Interest revenue received from government bonds
A. I and II
B. III only
C. II only
Explanation: The only item that is a temporary difference is the difference in the accounting for bad debts expense. The others are permanent differences.

User Contributed Comments 2

User Comment
kalps NB - that the deferred tax asset would arise only on the temporary difference
CoffeeGirl a. is permanent difference,cause municipal bonds doesn't pay tax
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