Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:

Question

Quizplus · Accepted Answer

Using different methods for financial reporting and tax purposes creates a temporary difference, which gives rise to deferred tax liability or asset. In this case, using straight-line depreciation for financial reporting and MACRS for tax purposes creates a temporary difference and gives rise to a deferred tax liability. Therefore, the best choice is D.

Using Straight-Line Depreciation for Financial Reporting Purposes and MACRS for Tax