At the beginning of 2012; Elephant, Inc. had a deferred tax asset of $8,000 and a deferred tax liability of $12,000. Pre-tax accounting income for 2012 was $600,000 and the enacted tax rate is 40%. The following items are included in Elephants pre-tax income:

Interest income from municipal bonds$ 48,000

Accrued warranty costs, estimated to be paid in 2013$104,000

Operating loss carryforward$ 76,000

Installment sales revenue, will be collected in 2013$ 52,000

Prepaid rent expense, will be used in 2013$24,000

76.What is Elephant, Inc.s taxable income for 2012?a.$600,000b.$504,000c.$696,000d.$904,000

77.Which of the following is required to adjust Elephant, Inc.s deferred tax asset to its correct balance at December 31, 2012?

a.A debit of $41,600b.A credit of $30,400c.A debit of $30,400d.A debit of $33,600

78.The ending balance in Elephant, Incs deferred tax liability at December 31, 2012 is a.$18,400b.$30,400c.$20,800d.$62,400

Hi, could you explain why prepaid rent expense is DTL? and why we use pre-tax accounting income minus all DTL and add DTA to get taxable income?