On December 31, 2020, XYZ Inc. has an account payable of $2,000 for operating expenses incurred during the year. These expenses are only tax deductible when paid. XYZ normally pays for its operating expenses one month after they are incurred. Assuming a 20% tax rate, these expenses shall result in:
A) a deferred tax liability of $2,000.
B) a deferred tax liability of $400.
C) a deferred tax asset of $400.
D) a deferred tax asset of $2,000.

Question

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The Answer of On December 31, 2020, XYZ Inc. has an account payable of $2,000 for operating expenses incurred during the year. These expenses are only tax deductible when paid. XYZ normally pays for its operating expenses one month after they are incurred. Assuming a 20% tax rate, these expenses shall result in:
A) a deferred tax liability of $2,000.
B) a deferred tax liability of $400.
C) a deferred tax asset of $400.
D) a deferred tax asset of $2,000.