The temporary difference associated with accelerated depreciation for tax purposes and straight-line depreciation for financial reporting purposes means that a firm will pay _____ income taxes in the early years of the asset's life, but this temporary difference will reverse over the entire asset life, resulting in _____ taxes in later years.

Question

Quizplus · Accepted Answer

Accelerated depreciation results in lower taxable income and thus lower taxes in the early years, but this difference reverses, leading to higher taxes in later years.

The Temporary Difference Associated with Accelerated Depreciation for Tax Purposes