Which of the Following Statements Concerning Deferred Taxes Is Correct

question 11

Multiple Choice

Which of the following statements concerning deferred taxes is correct?

• A)Deferred taxes will not be found in the asset section of a balance sheet.
• B)Deferred taxes arise from permanent differences in GAAP and tax accounting.
• C)Deferred taxes will only decrease when a cash payment is made.
• D)Deferred taxes arising from the depreciation of a specific asset will ultimately reduce to zero as the item is depreciated.

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Definitions:

Financing Activities

Transactions related to raising capital and repaying investors, including issuing shares, taking out loans, and paying dividends.

10-Year Bond

A debt security issued by governments or corporations with a fixed interest rate and maturity of ten years.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Direct Method

In cash flow reporting, this accounting method lists major cash inflows and outflows directly, showing the exact sources and uses of cash during the reporting period.