Tissues Ltd Has a Depreciable Asset That Is Estimated for Accounting

question 8

Multiple Choice

Tissues Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 8 years.For taxation purposes the useful life is 5 years.The asset was purchased at the beginning of year 1,there is no residual value,and the straight-line method of depreciation is used for both tax and accounting purposes.The tax rate is 30% and the cost of the asset is $100 000.What is the amount of the deferred tax liability account generated by this asset at the end of years 1,2 and 3?

• A) End of year 1 $0; year 2 $2250; year 3: $4500
• B) End of year 1 $7500; year 2 $15,000; year 3: $22 500
• C) End of year 1 $6750; year 2 $4500; year 3: $2250
• D) End of year 1 $2250; year 2 $4500; year 3: $6750

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Definitions:

Rhizome

Stem that grows horizontally along or under the ground.

Underground Stem

A type of stem that grows horizontally below the soil surface, such as a tuber or rhizome, playing a crucial role in vegetative reproduction.

Corm

A swollen underground stem or base serving as a storage organ, used by some plants to survive winter or drought conditions.

Underground Stem

A type of stem that grows below the surface of the soil, helping in vegetative reproduction and nutrient storage, as seen in tubers and rhizomes.