Scenario 2 As part of the audit, you have identified the following temporary differences that caused a change in the pretax accounting income. For each of these changes, identify whether it will result in future deductible amount or future taxable amount. # Temporary Difference Impact 1 Reported a contingency loss in the financial statement; however, tax-deductible when it is paid. 2 Prepaid rent, tax deductible when paid, 3 Unearned Income taxable when it is earned. Unrealized profit from investment at fair value (tax- deductible when it the investments are sold) 4 2 5 5 6 7 Warranty expenses, estimated when products are sold, deducted for tax purpose when paid) Advance rent receipts from operating lease. Reported depreciation using straight line methods. while accelerated depreciation is used for tax purpose Accrued expenses for employee post retirement benefits, tax-deductibe when payments are made. Allowance for doubtful debts. Prepaid insurance, tax deductible when it is paid. 8 8 9 10