Uqua Inc.purchased a depreciable asset for $189,000.First-year depreciation for book purposes was $22,000,and first-year MACRS depreciation was $37,800.If Uqua's marginal tax rate is 35%,the excess tax depreciation results in a $5,530:

Question

Quizplus · Accepted Answer

The excess tax depreciation of $15,800 ($37,800 - $22,000) results in a temporary difference between book and tax depreciation. This temporary difference creates a deferred tax liability because Uqua will have to pay additional taxes in the future when book and tax depreciation eventually catch up. Therefore, the correct choice is option B, deferred tax liability.

Uqua IncPurchased a Depreciable Asset for $189,000