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Unformatted text preview: ncome: 1.
The company sells its merchandise on an installment contract basis. In 2012, Lilliput elected, for tax purposes, to report the gross profit from these sales in the years the receivables are collected. However, for financial statement purposes, the company recognized all the gross profit in 2012. These procedures created a $240,000 difference between book and taxable incomes for 2012. Future collections of installment receivables are expected to result in taxable amounts of $120,000 in each of the next two years. 2. The company depreciates all of its property, plant and equipment using CCA for tax purposes and straight‐line for accounting purposes. This resulted in $42,000 excess CCA over accounting depreciation. This temporary difference will reverse equally over the three year period from 2013‐2015. 3. On July 1, 2012, Lilliput leased part of its building to Swift Books Ltd. on a two‐
year operating lease. The monthly rent is $30,000, and Swift paid the first year’s rent in advance (July 1, 2...
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