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.
-Organization costs reported in the income statement but amortized and deducted over five years for tax purposes.

Question

Quizplus · Accepted Answer

Organization costs reported in the income statement but amortized and deducted over five years for tax purposes will create a deferred tax asset as the company has already recognized the expense in their financial statements, but will have a tax deduction in future years. This results in a temporary difference between the financial statement and tax basis, thus creating a deferred tax asset.

Listed Below Are Five Independent Situations