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:

Question

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Marshland Company will record a deferred tax liability because the accelerated depreciation method for tax purposes results in lower taxable income initially, leading to lower taxes payable in the early years. However, for financial reporting, straight-line depreciation results in higher income, creating a temporary difference that will reverse in the future, leading to higher taxes payable later.

Marshland Company Uses the Straight-Line Depreciation for Financial Reporting Purposes