Under US GAAP, If a Firm Writes Down Inventory for Obsolescence

question 112

Multiple Choice

Under U.S. GAAP, if a firm writes down inventory for obsolescence, which of the following is created?

• A) a deferred tax asset
• B) a deferred tax liability
• C) a book basis of assets that is greater than the tax basis
• D) a book basis of liabilities that is less than the tax basis

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Definitions:

Failing

The condition or process of not meeting a desirable or intended objective, often used in the context of academic performance or machinery operation.

Probability

The quantification of an event's probability, expressed as a value from 0 to 1, where 0 means the event cannot happen and 1 means it will definitely occur.

Type I Error

The error made by rejecting a true null hypothesis, often referred to as a "false positive."

Type II Error

The error that occurs when a false null hypothesis is not rejected, also known as a "false negative."