A company is using the straight-line method for amortizing its capital assets for financial accounting purposes and CCA for tax purposes.If the net book value of the asset were greater than the undepreciated capital cost, what would the company report on their balance sheet?
A)A current future tax asset
B)A current future tax liability
C)A non-current future tax asset
D)A non-current future tax liability

Question

Quizplus · Accepted Answer

Since the net book value of the asset is greater than the undepreciated capital cost, it means that the company has already claimed tax deductions on the asset that are greater than the depreciation claimed for financial accounting purposes. Therefore, the company will have to pay additional taxes in the future when the asset is disposed of or sold, resulting in a future tax liability. This liability will be non-current since it will not be settled within the current year.

A Company Is Using the Straight-Line Method for Amortizing Its