Which of the following represents a taxable temporary difference?
A. Trade receivables and revenue have been recorded in the accounting books for 800. The related revenue will be taxed on a cash basis.
B. An accrued expense has a carrying value of 1,700. The related expense will be deducted for tax purposes on a cash basis.
C. A generator was impaired for book purposes, so that its carrying value is lower than its tax base.
Inventory of 33,000 was written off to its net realizable value of 28,000 in the accounting books, but not for tax purposes.
C. A generator was impaired for book purposes, so that its carrying value is lower than its tax base.
A taxable temporary difference exists when the carrying amount of an asset or liability in the financial statements is higher than its tax base, which would result in a higher amount being taxable income in the future when the difference reverses. In this case, the impairment of the generator for book purposes has led to a lower carrying value than its tax base, creating a taxable temporary difference.
