2. For each of the differences listed explain the difference in plain English by making up an example. Also explain why it is temporary. See example below Plain English description Why is this temporary Depreciation The equipment is Although tax depreciated straight-line depreciation is higher for book purposes, but this year, in future years under accelerated book depreciation will depreciation (MACRS) be higher. By its nature, for tax purposes accelerated depreciation means that depreciation deductions go down each year Is this difference currently favorable to the taxpayer? Yes. The annual depreciation deduction is higher than depreciation expense. This results in lower taxable income and lower taxes actually paid this year. Gain Bad debt expense Warranty expense Deferred compensation