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Another example: (Future Taxable Amount) In 2016 (1st yr of operation), Beny Co. has expenses...

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Another example: (Future Taxable Amount) In 2016 (1st yr of operation), Beny Co. has expenses of $50,000 for book and $60,000 for tax reporting. The difference in expenses results because Beny prepaid an insurance premium of $10,000 in 2016, which is immediately deductible for tax. However, the insurance premium covers the next two years. The tax rate is 40% for 2016, 2017, and 2018. Compute the deferred tax liability at 12/31/16. Computation of Deferred Tax Liability at 12/31/2016: 2016 2017 2018 Total Timing of Expense Recognition Accrual (Book) Cash Basis (Tax) Difference 2017 Future Years 2018 Total Future Taxable Amounts Prepaid Insurance Tax rate - - Def. tax liab, as of 12/31/16

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