Listed below are five independent situations. For each situation indicate (by letter) whether it will create (A) a deferred tax asset, (L) a deferred tax liability, or (N) neither.
-Research and development costs reported in the income statement but elected to be capitalized and amortized over five years for tax purposes.

Question

Quizplus · Accepted Answer

This situation will create a deferred tax asset because the company has paid more taxes in the current period than they will owe in the future due to the lower taxable income resulting from the tax deduction for the capitalized R&D.

Listed Below Are Five Independent Situations