Inferno Inc. is embroiled in a lawsuit. In 2015 they recognize that a loss of $45,000 is probable. Given a tax rate of 40%, how will this be treated in the accounting records?
A) deferred tax asset of $18,000
B) deferred tax liability of $18,000
C) deferred tax asset of $45,000
D) deferred tax liability of $45,000
Answer: A
Explanation: A) book liability exceeds tax liability; $45,000 × 40%
Business
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