Substantive tests include Question 16 The decision to extend credit beyond the normal credit limit is an example of Question 17 Control risk is Question 18 Which of the following represent temporary book-tax differences ? Question 19 North , Inc ., earns book net income before tax of $ 500,000 in 2010 . In computing its book income , North deducts $ 50,000 more in warranty expense for book purposes than allowed for tax purposes . North has no other temporary or permanent differences . Assuming the U . S . tax rate is 35 % and no valuation allowance is required , what is North ' s deferred income tax asset reported on its financial statements for 2010 ? Question 20 How are deferred tax liabilities and assets categorized on the balance sheet ? Question 21 Hot , Inc .' s primary competitor is Cold , Inc . When comparing relative deferred tax asset and liability accounts with Cold , which of the following should Hot do ? Question 22 Paint , Inc ., a domestic corporation , owns 100 % of Blue , Ltd ., a foreign corporation and Yellow , Inc ., a domestic corporation . Paint also owns 40 % of Green , Inc ., a domestic corporation . Paint receives no distributions from any of these corporations . Which of these entities ' net income are included in Paint ' s income statement for current year financial reporting purposes ? Question 23 Nocera , Inc . earns book net income before tax of $ 600,000 in 2010 . Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $ 120,000 . Nocera has no other temporary or permanent differences . Assuming the U . S . tax rate