A Company's Only Temporary Difference Results from Using Double Declining

question 16

Multiple Choice

A company's only temporary difference results from using double declining balance depreciation for tax purposes and straight-line depreciation for financial reporting. The company purchases new plant assets each year. If currently enacted tax law will result in a higher tax rate for all future tax years, which accounting approach for deferred taxes will result in the lowest net income for this current year?

• A) Nonallocation of deferred taxes.
• B) Partial allocation of deferred taxes under the asset/liability method.
• C) Comprehensive allocation of deferred taxes under the asset/liability method.
• D) Comprehensive allocation of deferred taxes under the deferred method.

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Definitions:

Degrees Of Freedom

The number of independent pieces of information in a dataset used in the calculation of a statistic, typically influencing the shape of various distributions.

Observations

Data points or elements collected during an experiment or study which represent individual pieces of information about the phenomena being studied.

Multiple Regression Model

A statistical technique that predicts the outcome of a response variable based on multiple explanatory variables.