Chapter 16, Problem 16.26E

Identifying income tax deferrals

• LO16–1, LO16–2, LO16–4, LO16–7

Listed below are ten independent situations. For each situation indicate (by letter) whether it will create a deferred tax asset (A), a deferred tax liability (L), or neither (N).

Situation

_______ 1. Advance payments on insurance, deductible when paid

_______ 2. Estimated warranty costs; tax deductible when paid

_______ 3. Rent revenue collected in advance; cash basis for tax purposes

_______ 4. Interest received from investments in municipal bonds

_______ 5. Prepaid expenses, tax deductible when paid

_______ 6. Net operating loss carryforward

_______ 7. Net operating loss carryback

_______ 8. Straight-line depreciation for financial reporting; MACRS for tax purposes

_______ 9. Organization costs expensed when incurred; tax deductible over 15 years

_______ 10. Life insurance proceeds received upon the death of the company president