[APPENDIX] Marshland Company uses the straight-line depreciation for financial reporting purposes and an accelerated depreciation method for tax purposes.As a result, Marshland will record:
A)a deferred tax asset.
B)a deferred tax liability.
C)a permanent difference.
D)tax-exempt depreciation.

Question

Quizplus · Accepted Answer

Since Marshland is using two different depreciation methods, they will have different depreciation expenses for financial reporting and tax purposes. This will result in a difference between the taxable income and financial income. This difference is called a temporary difference and will result in a deferred tax liability on the balance sheet.

[APPENDIX] Marshland Company Uses the Straight-Line Depreciation for Financial Reporting