18. A firm incurred fines and expenses because of violation of a law. These expe

Question

18. A firm incurred fines and expenses because of violation of a law. These expenses are recognized for financial reporting purposes but they are not recognized for tax purposes. The firm is most likely to record A) a deferred tax asset 8) a deferred tax liability no deferred tax asset or liability 19. Assume a firm uses accelerated depreciation for tax purposes and straight-line depreciation for book purposes. If the firm is growing A) the firm's Deferred Tax Liabilities related to this will never reverse 8) the firm's Deferred Tax Assets related to this will never reverse C) the effect of deferred taxes on cash flow will be negative and is continually adding fixed assets at higher prices (cost of the assets) 20. KLH Company reported the following: Gross Deferred Tax Assets at the beginning of the year Gross Deferred Tax Assets at the end of the year Valuation allowance at the beginning of the year Valuation allowance at the end of the year $10,500 $11,250 $2.700 $3,900 Based on this information, the firm most likely expects earnings to A) increase B) decrease C) remain relatively stable

Explanation / Answer

Question 18). Answer :- Option A). A deferred tax asset.

Question 19). Answer :- Option B). The firm's Deferred Tax Assets related to this will never reverse.

Question 20). Answer :- Option B). Decrease.

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