Reference no: EM132622798

Problem 1: Of the following temporary differences, which one ordinarily generates a deferred tax asset (DTA)?

Option 1: Use of the completed contract method for long-term construction contracts for tax reporting and use of the percentage of completion method for books.

Option 2: Using the installment sales method for tax returns.

Option 3: The estimated warranty expense (accumulated).

Option 4: Use of an accelerated depreciation method for tax reporting versus the straight-line method for books.

Problem 2: Which of the five criteria for classifying a lease as a finance lease requires less judgment on the part of the accountant?

Option 1: The term of the contract is for the majority of the asset's useful life.

Option 2: The legal title to the asset will be transferred to the lessee at the end of the contract.

Option 3: The present value of the lease payments and any residual value guaranteed by the lessee equals or exceeds "substantially all" the fair value of the asset.

Option 4: The contract contains a purchase option that is reasonably certain that the lessee will exercise it.