Indicate and describe whether each of the subsequent independent situations should be treated as a temporary difference or a permanent difference.
i. Evaluated warranty costs (covering a three-year period) are expensed for accounting purposes when incurred.
ii. Depreciation for accounting and income tax purposes differs because of dissimilar bases of carrying the related property. The different bases are a result of a business combination performed as a purchase for accounting purposes and as a tax-free exchange for income tax purposes.
iii. A company correctly uses the equity method to account for its 30% investment in another company. The investee pays dividends that are about 10% of its annual earnings.
For each of the above independent situations, evaluate whether those situations that are treated as temporary differences will result in future taxable amounts or future deductible amounts and whether they will result in deferred tax liabilities or deferred tax assets. Explain.