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Listed below are 10 causes of temporary differences. For each temporary difference indicate the balance sheet account for which the situation creates a temporary
Listed below are 10 causes of temporary differences. For each temporary difference indicate the balance sheet account for which the situation creates a temporary difference. 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. Unrealized gain reported in net income from reporting investments at fair value; taxable when investments are sold. 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. Balance Sheet Account
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