The largest item of the Deferred Tax Liability for most companies is caused by:
A)providing the allowance for doubtful accounts for book purposes.
B)differences in inventory cost flow assumptions (FIFO vs.LIFO)for tax versus financial accounting purposes.
C)differences in depreciation methods (accelerated vs.straight-line)for tax versus financial accounting purposes.
D)amortizing bond premium or discount for tax purposes.

Question

Quizplus · Accepted Answer

Differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes often create the largest deferred tax liabilities, as accelerated depreciation for tax purposes results in lower taxable income in the early years compared to straight-line depreciation used for financial reporting.

The Largest Item of the Deferred Tax Liability for Most