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

question 33

Essay

Deferred income taxes
At the end of its first year of operations,Harding Construction,Inc. ,included in its balance sheet a long-term liability entitled "Deferred Income Taxes."
(a)Briefly explain what deferred income 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 income taxes to increase or decrease over the next few years? Explain.

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Definitions:

Simultaneous Consumption

A characteristic of services that indicates they are consumed at the same time as they are produced.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of production and the quantity of output increase.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different consumers, based on market segments, capacity to pay, or purchasing contexts.

Monopoly Power

The ability of a monopolist to significantly control market price or exclude competition in a particular market.