Which One of the Following Transactions Would Result in the Creation

question 4

Multiple Choice

Which one of the following transactions would result in the creation of a noncurrent deferred tax liability?

• A)interest received on municipal bonds
• B)a contingent liability expensed in the current period that is expected to require a cash payment in three years
• C)royalties received in advance that are taxable when received, but that will be earned within the next three months
• D)using an accelerated depreciation method for income tax purposes and the straight-line method for financial reporting purposes

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Definitions:

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business, showcasing the company's financial health and operational efficiency.

Crossover Rate

The rate at which two projects have the same net present value or where their NPV profiles intersect.

Investment Cash Flows

Money movements related to investments in and out of a company, such as purchasing or selling assets.

NPV Profiles

Graphical representations that show the relationship between a project's net present value (NPV) and various discount rates, helping in the assessment of investment viability.