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Part 1: Determine for each difference whether it is temporary or permanent, and whether it will give rise to a DTA or a DTL.

Part 2: Determine the following for the year ended 12/31, Year 3:

ITEM The Year 3 income statement of Diamond Co. reported income before Income taxes of $250,000. During Year 3, estimated tax payments were made out to the IRS, totaling $28,000. Diamond cervear 2 balance sheet reported a deferred tax liability of $5,000. The following items were included in income under GAAP and were compared to corresponding item sunder tax rules wherever applicable: UNDER UNDER GAAP TAX LAW Parking ticket violation expenses 7,000 0 Warranty expenses 85,000 20,000 Depreciation expense $45,000 $75,000 Dividends received from 100%-owned Investee 49,000 0 Revenue from installment sales $37,000 $52,000 Interest from tax-exempt bonds 18,000 0 In addition, during Year 3, Diamond Co. paid $36,000 for liability insurance for Years 4 and 5 as well as $20,000 in premiums for life insurance on its rate for which Diamond ca, is the beneficiary; also, during Year 3, a customer paid $40,000 for product to be delivered in Year 4. The applicable tax . INSTRUCTIONS: (Enter answers in the spaces provided below. Anything that is inapplicable should be left blank.) Part 1: Determine for each difference whether it is temporary or permanent, and whether it will give rise to a DTA or a DTL. Part 2: Determine the following for the year ended 12/31, Year 3: A) Taxable income c) Income Taxes payable E) Deferred tax asset or liability to report on the balance sheet B) Current tax expense D) Deferred tax expense or benefit F) Total provision for income taxes to report on the income statement PART 1 AMOUNT AMOUNT AMOUNT TYPE OF DIFFERENCE WILL GIVE RISE TO... INCOME STATEMENT Provision for income taxes Current income tax expense Deferred income tax Total provision for income taxes ITEM Pretax Financial Income Violation Warranty Depreciation Dividends Installment Sales Interest Prepaid insurance Life insurance premiums Unearned Revenue Taxable income BALANCE SHEET Current Liabilities Income Taxes Payable Non-Current Net DT Deferred Tax

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