Madden Corporation wants to determine the amount of

deferred tax #8994

Madden Corporation wants to determine the amount of deferred tax that should be reported on
its 2017 financial statements. It has compiled a list of differences between the accounting
conducted for tax purposes and the accounting used for financial reporting (book)
purposes.RequiredFor each of the following items, indicate whether the difference should be
classified as a permanent or a temporary difference.1. During 2017, Madden received interest
on state bonds purchased as an investment. The interest can be treated as tax-exempt interest
for tax purposes.2. During 2017, Madden paid for a life insurance premium on two key
executives. Madden's accountant has indicated that the amount of the premium cannot be
deducted for income tax purposes.3. During December 2017, Madden received money for
renting a building to a tenant. Madden must report the rent as income on its 2017 tax form. For
book purposes, however, the rent will be considered income on the 2018 income statement.4.
Madden owns several pieces of equipment that it depreciates using the straight-line method for
book purposes. An accelerated method of depreciation is used for tax purposes, however.5.
Madden offers a warranty on the product it sells. The corporation records the expense of the
warranty repair costs in the year the product is sold (the accrual method) for book purposes. For
tax purposes, however, Madden is not allowed to deduct the expense until the period the
product is repaired.6. During 2017, Madden was assessed a large fine by the federal
government for polluting the environment. Madden's accountant has indicated that the fine
cannot be deducted as an expense for income tax purposes.View Solution:
Madden Corporation wants to determine the amount of deferred tax

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