A Company's Only Temporary Difference Results from Using Double Declining

question 16

Multiple Choice

A company's only temporary difference results from using double declining balance depreciation for tax purposes and straight-line depreciation for financial reporting. The company purchases new plant assets each year. If currently enacted tax law will result in a higher tax rate for all future tax years, which accounting approach for deferred taxes will result in the lowest net income for this current year?

• A) Nonallocation of deferred taxes.
• B) Partial allocation of deferred taxes under the asset/liability method.
• C) Comprehensive allocation of deferred taxes under the asset/liability method.
• D) Comprehensive allocation of deferred taxes under the deferred method.

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Definitions:

Case History

A detailed compilation of information about an individual or group, including background, development, and events, often used in medical, psychological, or sociological contexts.

Naturalistic Observation

A research method wherein subjects are observed in their natural environment without any manipulation by the observer.

Double-blind Study

A scientific experiment where both the participants and the researchers do not know who receives the treatment or the placebo, eliminating bias.

Survey Research

A research method involving the collection of information from a sample of individuals through their responses to questions.