In 2018, Magic Table Inc

question 77

Multiple Choice

In 2018, Magic Table Inc. decides to add a 36-month warranty on its new product sales. Warranty costs are tax deductible when claims are settled. In its financial statements for 2018, Magic Table Inc incurs:

• A) An increase in a deferred tax asset.
• B) A decrease in a deferred tax asset.
• C) An increase in a deferred tax liability.
• D) A decrease in a deferred tax liability.

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Definitions:

Farm Machinery

Equipment and machinery specifically designed and used for agricultural operations.

Consumer Goods

Products that are purchased for personal use or consumption by the general public, such as clothing, food, and electronics.

Farm Products

Commodities produced through agricultural activities, such as crops, livestock, and their by-products.

Fidelity Bond

A form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals, typically employees.