Lensa Inc. purchased machinery several years ago for $400,000. This year, book depreciation on the machinery was $40,000, MACRS depreciation was $35,720, and Lensa's marginal tax rate is 35%. Which of the following statements is true?
A) The book/tax difference in depreciation results in a $1,498 decrease in Lensa's deferred tax liabilities.
B) The book/tax difference in depreciation results in a $1,498 deferred tax asset.
C) The $4,280 difference between book and tax depreciation is unfavorable.
D) Both a. and c. are true.
Correct Answer:
Verified
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