The recognition of a deferred tax liability that results from the use of straight-line depreciation on financial statements and double-declining balance on tax returns will
A)increase the current ratio.
B)increase the debt/equity ratio.
C)increase the quick ratio.
D)decrease the debt/asset ratio.

Question

Quizplus · Accepted Answer

The recognition of a deferred tax liability means that a company will have to pay more taxes in the future. This will increase the liabilities of the company, which will result in an increase in the debt/equity ratio. None of the other options are affected by the recognition of a deferred tax liability.

The Recognition of a Deferred Tax Liability That Results from the Use