Business & Finance

Of the following temporary differences, which one ordinarily creates a deferred tax asset?

A. Completed-contract method for long-term construction contracts for tax reporting.
B. Installment sales for tax reporting.
C. Accrued warranty expense.
D. Accelerated depreciation for tax reporting.

24. Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes:

A. An increase in a deferred tax asset.
B. A decrease in a deferred tax asset.
C. An increase in a deferred tax liability.
D. A decrease in a deferred tax liability.

25. At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A disclosure note reveals that the entire $400,000 will be earned in the next year. In the absence of other temporary differences, in the balance sheet one would also expect to find a:

A. Noncurrent deferred tax liability.
B. Noncurrent deferred tax asset.
C. Current deferred tax liability.
D. Current deferred tax asset.

Solution:

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