CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Gumbo Co. uses straight-line depreciation for financial reporting and double-declining balance for tax. Using straight-line, the company reports tax of $18,000; under double-declining balance, tax is $14,000. Gumbo would report a ______.
A. deferred tax asset of $4,000
B. deferred tax liability of $4,000
C. deferred tax asset of $14,000

User Contributed Comments 5

User Comment
CoffeeGirl tax payable = 14000
income tax expense = 18000
tax payable < tax expense
deferred tax liability 4000
for financing, GAPP, tax expense
for tax, tax code, tax payble.
Prussle Should't it be a tax asset?
sergashev It is deferred liability since the company will pay $4,000 later.
poomie83 $14k tax payable as using double declining for tax purposes will result in higher expenses leading lower taxable income and therefore lower amount of tax
schweitzdm Need more detailed explanation
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