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Gustavo Bertoli
on Nov 27, 2024

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An analyst has reviewed Blunt Company's note disclosures for its deferred taxes and noted a large increase in Blunt's deferred tax liability.This increase could be caused by

A) growth in capital expenditures.
B) tax law changes that limit accelerated depreciation.
C) GAAP warranty expenses that exceed tax warranty expenses.
D) shortening the estimated useful lives of its fixed assets.

Deferred Tax Liability

A tax obligation that is recorded on the balance sheet due to temporary timing differences in recognizing revenue and expenses for accounting and tax purposes.

Capital Expenditures

Capital allocated by an enterprise for the purchase, improvement, and upkeep of tangible assets like land, factories, or machinery.

GAAP Warranty Expenses

Expenses recognized in accordance with Generally Accepted Accounting Principles (GAAP) related to the estimated cost of warranties on sold products.

  • Understand the differences between temporary and permanent differences in tax accounting.
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Martha WilsonNov 28, 2024
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