If a company uses straight-line for financial reporting purposes and MACRS for tax purposes, in the early life of an asset, the company will increase:
A) taxes paid.
B) minority interests.
C) deferred tax assets.
D) deferred tax liabilities.

Question

Quizplus · Accepted Answer

Using MACRS for tax purposes results in higher depreciation expenses in the early years, reducing taxable income and taxes paid. However, for financial reporting, straight-line depreciation results in lower depreciation expenses, leading to higher reported income. This creates a temporary difference, resulting in deferred tax liabilities.

If a Company Uses Straight-Line for Financial Reporting Purposes and MACRS