Deferred Income Taxes At the End of Its First Year of Operations, Harding

question 130

Essay

Deferred income taxes
At the end of its first year of operations, Harding Construction, Inc., included in its statement of financial position a noncurrent liability entitled "Deferred Taxes."
(a) Briefly explain what deferred taxes represents, including how this liability came into existence and whether such an item is generally perceived as favorable or unfavorable from company management's point of view.
(b) If Harding Construction, Inc., is a successful, growing business, would you expect the liability for deferred taxes to increase or decrease over the next few years? Explain.

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Definitions:

Limited Partnership

A form of partnership comprised of one or more general partners who manage the business and have unlimited liability, and one or more limited partners who have limited liability and do not participate in day-to-day management.

Fraud Suits

Legal actions initiated to address claims of deceitful practices or dishonesty, aiming to recover losses or damages caused by fraud.

Trade Secrets

Confidential business information that gives a company a competitive advantage.

Search Warrant

An order granted by a public authority, such as a judge, that authorizes law enforcement personnel to search particular premises or property.