Wave Corporation Is Determining Its Income Tax Liability

question 110

Multiple Choice

Wave Corporation is determining its income tax liability.It has one machine that cost $30,000 with a 4-year life and no salvage value.Wave is using an accelerated depreciation method for tax purposes.For accounting purposes, Wave has decided to use the straight-line method.Which of the following statements is true?

• A) There will be a temporary difference between accounting income and income for tax purposes.
• B) There will be a permanent difference between accounting income and income for tax purposes.
• C) Wave's accounting income and income for tax purposes will be equal.
• D) Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.

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Definitions:

Third Market

Trading venue for exchange-listed stocks that occurs off the official exchange, often involving large institutional investors through over-the-counter (OTC) transactions.

Fourth Market

Trading of securities directly between investors, bypassing traditional brokerage and exchange platforms.

OTC Markets

Over-the-counter markets refer to decentralized markets where trading occurs directly between two parties without the supervision of an exchange.

Institution-To-Institution Trading

The buying and selling of securities between institutional investors, like pension funds and mutual funds, rather than individual investors.