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What Deferred Tax Assets Or Liabilities Will Result From These Accounting Practices? |
Widget, Inc. uses the unravel-line method to depreciate assets in determining its financial profits. Widgets also accrues an amount for covenant expense at the end of the years even though it normally takes a few years for any defects to show in its products. For tax purposes, Widgets occupied an accelerated
| Answer: When they devaluate straight-line (on the books), it's less than the accelerated depreciation (tax). Straight Line: $10,000 over 10 years Y1: $1,000 Y2: $1,000 and so on Accelerated: Y1: $2,000 Y2: $2,000 and so on... |
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