The Temporary Difference Associated with Accelerated Depreciation for Tax Purposes

question 98

Multiple Choice

The temporary difference associated with accelerated depreciation for tax purposes and straight-line depreciation for financial reporting purposes means that a firm will pay _____ income taxes in the early years of the asset's life, but this temporary difference will reverse over the entire asset life, resulting in _____ taxes in later years.

• A)higher; higher
• B)lower; higher
• C)higher; lower
• D)lower; lower
• E)average; average

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Definitions:

Office Space

Premises rented or leased by businesses to conduct their operations, often equipped with necessary facilities and services.

Minor Requirement

A smaller or less significant obligation or condition that must be fulfilled, often in addition to major requirements.

De Facto Corporation

A corporation defectively incorporated in good faith that exists in fact though not in law.

Incorporation

The process of legally declaring a corporate entity as separate from its owners, providing it with its own rights, privileges, and liabilities distinct from those of its members.