Assuming a 40% statutory tax rate applies to all years involved, which of the fo

Question

Assuming a 40% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet? (Hint which item(s) make taxable income lower this period?)
I. A revenue is deferred for financial reporting purposes but not for tax purposes.
II. A revenue is deferred for tax purposes but not for financial reporting purposes.
III. An expense is deferred for financial reporting purposes but not for tax purposes.
IV. An expense is deferred for tax purposes but not for financial reporting purposes. Answer                      

                            
           item II only                             
           items I and II only                             
           items II and III only                             
           items I and IV only

Explanation / Answer

items II and III only

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