A deferred tax liability is recognized for:
A) temporary differences resulting from net operating loss carry forwards.
B) temporary differences related to depreciation.
C) permanent tax difference related to depreciation.
D) All of the above.

Question

Quizplus · Accepted Answer

A deferred tax liability is recognized for temporary differences that will result in taxable amounts in future years, such as differences related to depreciation methods used for accounting purposes versus tax purposes. Choices A and C are incorrect because net operating loss carryforwards lead to deferred tax assets, not liabilities, and permanent differences do not result in deferred tax liabilities or assets since they do not reverse in the future.

A Deferred Tax Liability Is Recognized For