Mangrove Limited Has a Product Warranty Liability Valued at $12

question 3

Multiple Choice

Mangrove Limited has a product warranty liability valued at $12 000. The product warranty costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has:

• A) a deductible temporary difference of $12 000.
• B) a taxable temporary difference of $12 000.
• C) a deferred tax asset of $12 000.
• D) a future deductible amount of $0.

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Definitions:

Short-Run

In economics, a period during which at least one factor of production is fixed and cannot be changed, influencing cost and production decisions.

Machines

Devices or systems designed to perform tasks or processes automatically or with minimal human intervention.

Total Cost

The complete cost of production, including both fixed and variable costs, for producing a specified number of goods or services.

Price L

A symbolic representation often used in economic models to denote the price of a particular good or service, labeled "L".