Which of the Following Would Result in a Deferred Tax

question 6

Multiple Choice

Which of the following would result in a deferred tax asset?

• A) Using straight-line depreciation for the books and accelerated depreciation for tax.
• B) Rent received in advance.
• C) Warranty provision.
• D) Point of sale revenue recognition for the books, and cost recovery method of revenue recognition for tax.

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Definitions:

CAPM

The Capital Asset Pricing Model, a formula used to determine the expected return on an investment, factoring in risk and the time value of money.

Nonsystematic Variance

Nonsystematic variance, also known as unsystematic risk, is the portion of an investment's risk that is attributable to the specific risk of its issuer and can be mitigated through diversification.

Security Market Line

A graphical representation of the capital asset pricing model, showing the expected return of an investment as a function of its systemic risk.

Nonsystematic Risk

The risk associated with an individual asset or investment, resulting from factors specific to its issuer's performance and not the broader market.