Chelsea Inc. reports tax revenues (income) using the installmentmethod (cash basis), but reports book revenues on an accrual basis.As a result, it has a book-tax difference in that it is recordingbook revenues prior to recording tax revenues (income). Assume thetax rate is 40%

Chelsea INC. GAAP Reporting

	2014	2015	2016	Total
Revenues	130000	130000	130000
Expenses	60000	60000	60000
Pretax Financial Income	70000	70000	70000	210000
Income Tax Expense (40%)	28000	28000	28000	84000

Chelsea INC. Tax Reporting

	2014	2015	2016	Total
Revenues	100000	150000	140000
Expenses	60000	60000	60000
Taxable Income	40000	90000	80000	210000
Income Taxes Payable (40%)	16000	36000	32000	84000

Based on the information provided, complete the following chartsand answer the related questions:

GAAP versus Tax Reporting

		GAAP Versus Tax Reporting
	2014	2015	2016	Total
GAAP Revenues
Tax Revenues
Book-Tax Difference

	Income	Expense and	Income Tax	Payable Reporting
	2014	2015	2016	Total
Income Tax Expense
Income Tax Payable
Book-Tax Difference

A) In this situation, do GAAP Revenues and Tax Revenues in 2014reverse out in future years? YES / NO

B) In this situation, the differences result in a deferred taxliability. Which of the following statements below best describeswhy?

a. The difference is temporary and results in a future taxobligation

b. The difference is temporary and results in a future taxbenefit

c. The difference is permanent and results in a future taxobligation

d. The difference is permanent and results in a future taxbenefit

C) How much will be reported for the deferred tax liability atthe end of each of the following three years:

2014: ___________________

2015: ___________________

2016: ___________________