Which of the Following Temporary Differences Creates a Deferred Tax

question 67

Multiple Choice

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

• A)Accelerated tax depreciation in excess of straight-line book depreciation.
• B)Prepayment income reported as income on the tax return prior to being reported as income on the financial income statement.
• C)Gain reported on the income statement prior to being reported on the tax return.
• D)Prepayment deduction reported on the tax return prior to being reported on the income statement.

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Definitions:

Current Cost

The cost to replace an asset or settle a liability at the current market rate, as opposed to its historical purchase price or book value.

Average Cost

A calculation that divides the total cost of goods available for sale by the total number of units available for sale, determining the cost per unit.

Exchange Rates

The rate at which one currency can be exchanged for another, dictating how much of one currency you can get for a unit of another currency.

Foreign Supplier

A business based in another country that provides goods or services to companies or consumers in a different nation.