Listed below is a group of temporary differences. For each item, identify if it leads to...

Listed below is a group of temporary differences. For each item, identify if it leads to a deferred tax asset (DTA) or a deferred tax liability (DTL).

1. Accrued of a loss contingency; tax deductible when paid.

2. Prepaid rent; tax deductible when paid

3. Warranty expenses estimated for financial reporting purposes; deductible for tax purposes when paid

4. Unrealized loss from recording investments at fair value; tax deductible when investments are sold

5. Advance rent receipts on an operating lease; taxable when received

6. Straight-line depreciation for financial reporting; accelerated depreciation for tax purposes

7. Accrued bond expense; tax deductible when paid

8. Online newspaper subscription revenue taxable when received; recognized for financial reporting when the online newspaper is provided

Expert Solution

Deferred Tax is created when there is timing difference between tax and book values for particular event.
The effect of tax on timing difference is termed as deffered tax. Now there can be Deferred tax liability (DTL)
ans Deferred Tax Assets(DTA)
DTL is created when income as per books is more than income as per tax purpose (taxable income) which means we have
paid less tax in current period and have to pay more tax in future years hence liability is deferred
DTA is created when taxable income is more than book income, than we pay more tax in current year and will pay less
tax in future year i.e the asset is deferred.
Hence the answers are:
1	Deferred Tax liabilty
2	Deferred Tax Asset
3	Deferred Tax liabilty
4	Deferred Tax Asset
5	Deferred Tax liabilty
6	Deferred Tax Asset
7	Deferred Tax liabilty
8	Deferred Tax liabilty

If any doubt please comment

ekkarill92 answered 1 year ago

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