Mangrove Limited has a product warranty liability valued at $12 000. The product warranty costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has:

Question

Quizplus · Accepted Answer

The warranty liability creates a deductible temporary difference because the costs are not tax deductible until paid, leading to a future tax deduction.

Mangrove Limited Has a Product Warranty Liability Valued at $12