A Deferred Tax Liability Arising from the Use of an Accelerated

question 14

Multiple Choice

A deferred tax liability arising from the use of an accelerated method of depreciation for tax purposes and the straight-line method for financial reporting purposes would be classified on the balance sheet as

• A) a current liability.
• B) a noncurrent liability.
• C) a current liability for the portion of the temporary difference reversing within a year and a noncurrent liability for the remainder.
• D) an offset to the accumulated depreciation reported on the balance sheet.

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Definitions:

Cost-Benefit Constraint

The principle that actions or decisions should only be taken or made if the benefits outweigh the costs.

Conservation Principle

A principle in physics stating that certain properties such as mass, energy, or charge in an isolated system remain constant over time.

Perpetual Inventory System

An inventory accounting system where updates are made continuously to the inventory accounts and cost of goods sold as transactions occur.

FIFO

"First In, First Out," an inventory valuation method where the costs of the oldest inventory items are assigned to the cost of goods sold first.