Listed below are 10 causes of temporary differences

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7. Listed below are 10 causes of temporary differences. For each temporary difference, indicate (by letter) whether it will create future deductible amounts (D) or future taxable amounts (T).
Temporary Difference D 1. Accrual of loss contingency, tax-deductible when paid. 2. Newspaper subscriptions; taxable when received, recognized for financial reporting when earned.
3. Prepaid rent, tax-deductible when paid.
4. Accrued bond interest expense, tax-deductible when paid.
5. Prepaid insurance, tax-deductible when paid.
6. Unrealized loss 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 postretirement benefits, tax-deductible when subsequent payments are made.
8. Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) Situation 1 2 3 4 Taxable income $ 85 $ 215 $ 195 $ Future deductible amounts 15 20 Future taxable amounts 15 15 Balance(s) at beginning of the year: Deferred tax asset 2 9 Deferred tax liability 2 The enacted tax rate is 40%. Required: For each situation, determine the following: (Enter your answers in thousands. Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.) 260 20 30 4 2
Situation 1 2 3 4 a. Income tax payable currently. $34 $86 $78 $104 b. Deferred tax asset—balance. $6 $0 $8 $8 c. Deferred tax asset—change $4 $0 $(1) $4 d. Deferred tax liability—balance. $0 $6 $6 $12 e. Deferred tax liability—change $0 $4 $4 $12 f. Income tax expense. $30 $90 $83 $112 At the end of 2015, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2016, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2016 is $180 million and the tax rate is 40%. Required: 1. Prepare the journal entry(s) to record Payne’s income taxes for 2016, assuming it is more likely than not that the deferred tax asset will be realized. (If no entry is required for a transaction/event,

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