Deferred Tax Assets | Deferred tax Liabilities | CPA EXAM FAR | Intermediate Accounting

Practicing deferred tax questions for CPA FAR? This practice session covers deferred tax assets and liabilities — temporary differences, installment sales, warranties, prepaids, and the valuation allowance — with useful shortcuts, taught by Professor Farhat for CPA candidates and accounting students in intermediate accounting and the FAR section. Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students. Professor Farhat reviews key definitions, explains how changes in deferred tax accounts affect income tax expense, and works problems showing why installment sales create deferred tax liabilities, why warranties create deferred tax assets, and when a valuation allowance is required. Video Timeline & Key Concepts: 0:00 — Introduction 0:52 — Definitions and true/false review 3:32 — Accounting mechanics and shortcuts 9:37 — Installment sales and deferred tax liabilities 14:06 — Financial versus tax reporting differences 29:38 — Valuation allowance Frequently Asked Questions: What creates a deferred tax liability? A deferred tax liability arises from a temporary difference that will increase taxable income in the future, such as using the installment method for tax while recognizing the full sale for books. What creates a deferred tax asset? A deferred tax asset arises from a temporary difference that will produce future deductible amounts, such as warranty expense recognized for books before it is deductible for tax. How does a change in a deferred tax liability affect income tax expense? When a deferred tax liability increases, income tax expense increases, and when it decreases, income tax expense decreases, holding other items constant. When is a valuation allowance required? A valuation allowance is recorded when it is more likely than not that some or all of a deferred tax asset will not be realized. Why do installment sales create a deferred tax liability? Installment sales defer taxable income to future periods while book income is recognized now, creating a temporary difference that reverses as a deferred tax liability. #CPAexam #CMAexam #enrolledagentexam #accountingcourses #collegecourses #courses #FAR #deferredtax #valuationallowance #incometax #intermediateaccounting #ProfessorFarhat