Are Form 1120 Schedule M 3 Goodwill 2019-2024

In this video, we are going to discuss temporary differences between book income and taxable income. Depreciation frequently creates a temporary difference because for book purposes, many firms use the straight-line method of depreciation. However, for tax purposes, they are required to use an accelerated form of depreciation. This means that they take the same amount of depreciation over the entire life of the asset, but for tax purposes, they front-load the deductions, taking more in the early years and fewer in the later years. This creates a deferred tax liability that will reverse over time. Recognizing bad debt expense also leads to a temporary difference. For book purposes, firms use the accrual method, where they recognize bad debt before it becomes bad. This means they don't wait for the customer to go bankrupt before deducting the bad debt expense. However, for tax purposes, they use the direct write-off method, where they wait until the customer goes bankrupt or it becomes clear that they won't pay before taking the tax deduction. Warranty expenses work in a similar way. For book purposes, firms accrue warranty expenses based on sales, even if no actual expenditures have been made. However, for tax purposes, they wait until cash is paid out for warranty expenditures to take the deduction. Prepaid expenses, such as prepaid rent, are treated differently for book and tax purposes. For book purposes, prepaid rent is capitalized as an asset and then expensed over time. But for tax purposes, the expense is recognized as soon as the cash is paid out, without any capitalization. On the other hand, unearned revenue, when revenue is received in advance, is also treated differently for book and tax purposes. For book purposes, it is considered a liability until the month or year has passed, and it...