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

Question

Quizplus · Accepted Answer

The difference between the straight-line depreciation method used for financial reporting and the accelerated depreciation method used for tax purposes creates a timing difference in recognizing the expense, which leads to a deferred tax liability.

O'hara Company Uses the Straight-Line Depreciation for Financial Reporting Purposes