1.

When a company depreciates a plant & Equipment asset at a faster rate for income tax purposes than it does in the accounting records, what will this crated in the accounting records?

a. Deferred tax liability

b. Higher tax basis than book value in the early years of the assets life

c. Deferred tax asset

d. Lower tax basis than book value in the early years of the assets life

2.Which of the following will result in a U.S. firm recognizing a deferred tax asset?

a. Accounting for bad debts under the allowance method for financial reporting while using the direct write-off method for tax reporting purposes.

b. Recognizing warranty expense in period of product sale for financial reporting while deducting warranty costs in the period of repair/replacement for tax reporting purposes.

c. Having an operating loss carry forward available for future tax deductibility.

d. All of the above.

3. When an amount of tax that was previously included as part of a deferred tax liability is paid, it is said that the temporary difference:

a. Originates

b. Decreases

c. Increases

d. Reverses