Question

E 16-8 Identify future taxable amounts and future deductible amounts 눈 LO16-2, 누 LO16-3 Listed below are 10 causes of temporary differences. For each temporary difference, indicate (by letter) whether it will create future deductible amounts (D) or future taxable amounts (T). Temporary Difference 1. Accrual of loss contingency; tax deductible when paid. 2. Newspaper subscriptions; taxable when cash is received, recognized for financial reporting when the performance obligation is satisfied. 3. Prepaid rent; tax deductible when paid. 4. Accrued bond interest expense; tax deductible when poid. 5. Prepaid insurance; tax deductible when paid 6. Unrealized loss reported in net income from recording investments at fair value; tax deductible when investments are sold. 7. Warranty expense; estimated for financial reporting when products are sold; deducted for tax purposes when paid. 8. Advance rent receipts on an operating lease as the lessor; taxable when received, 9. Straight-line depreciation for financial reporting; accelerated depreciation for tax purposes. 10. Accrued expense for employee vacation days not yet taken; tax deductible when employee takes vacation in future. In year 1 , Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journa entry to record the transaction in yeat 3 will include (Select all that apply.) debit to common stock for $2,000 credit treasury stock for $8,000 credit to retained earnings for $3,000 credit treasury stock for $5.000. credit to paid-in capital from treasury stock for $3.000.

Answer 1

Temporary Difference 1 will create future deductible amounts (D) while Temporary Differences 2, 6, 7, 8, 9 will create future taxable amounts (T). Temporary Differences 3, 4, 5, and 10 will create future deductible amounts (D).

Step-by-step explanation:

Temporary Difference 1: Accrual of loss contingency will create future deductible amounts (D) since it will be tax deductible when paid.

Temporary Difference 2: Newspaper subscriptions will create future taxable amounts (T) since it will be taxable when cash is received, recognized for financial reporting when the performance obligation is satisfied.

Temporary Difference 3: Prepaid rent will create future deductible amounts (D) since it will be tax deductible when paid.

Temporary Difference 4: Accrued bond interest expense will create future deductible amounts (D) since it will be tax deductible when paid.

Temporary Difference 5: Prepaid insurance will create future deductible amounts (D) since it will be tax deductible when paid.

Temporary Difference 6: Unrealized loss reported in net income from recording investments at fair value will create future taxable amounts (T) since it will be tax deductible when investments are sold.

Temporary Difference 7: Warranty expense will create future taxable amounts (T) since it will be deducted for tax purposes when paid.

Temporary Difference 8: Advance rent receipts on an operating lease as the lessor will create future taxable amounts (T) since it will be taxable when received.

Temporary Difference 9: Straight-line depreciation for financial reporting will create future taxable amounts (T) since it will be accelerated depreciation for tax purposes.

Temporary Difference 10: Accrued expense for employee vacation days not yet taken will create future deductible amounts (D) since it will be tax deductible when employee takes vacation in future.