Using Straight-Line Depreciation for Financial Reporting Purposes and MACRS for Tax

question 1

Multiple Choice

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:

• A) Future deductible amount.
• B) Permanent difference not requiring inter-period tax allocation.
• C) Deferred tax asset.
• D) Deferred tax liability.

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Definitions:

Consideration

Something of value exchanged between parties in a contract, making the agreement legally binding.

Adequacy of Consideration

An evaluation of whether the value exchanged between parties in a contract is reasonably fair at the time of the agreement.

Bargained-for Exchange

An essential principle of contract law involving the mutual exchange of promises or consideration between parties entering an agreement.

Legal Sufficiency

The adequacy of evidence or legal grounding in an agreement, claim, or defense that meets minimum legal standards to proceed or withstand scrutiny in a court of law.