Exoil Recorded an Expense and Corresponding Liability to Recognize Potential

question 73

Multiple Choice

Exoil recorded an expense and corresponding liability to recognize potential losses relating to an oil spill in 2006 of $10 million. Its net income for the year was $200 million. It was not able to take a deduction for tax purposes until later years when it actually paid cash out in relation to this event. In 2006, with respect to this, Exoil would have:

• A)recognized a deferred tax liability.
• B)recognized a tax loss carryforward.
• C)recognized a deferred tax asset.
• D)recognized a deferred equity loss.

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