Wave Corporation Is Determining Its Income Tax Liability

question 110

Multiple Choice

Wave Corporation is determining its income tax liability.It has one machine that cost $30,000 with a 4-year life and no salvage value.Wave is using an accelerated depreciation method for tax purposes.For accounting purposes, Wave has decided to use the straight-line method.Which of the following statements is true?

• A) There will be a temporary difference between accounting income and income for tax purposes.
• B) There will be a permanent difference between accounting income and income for tax purposes.
• C) Wave's accounting income and income for tax purposes will be equal.
• D) Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.

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