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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What are the three characteristics of a liability, and why does a deferred tax liability of a corporation meet these characteristics?

To determine

Identify the features of deferred tax liability and explain the reasons behind the deferred tax liability of a company to meet the given features.

Explanation

Deferred tax liability: When Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

The following three features of deferred tax liability are as follows:

  • First characteristic: It is an obligation of the business entity to offer economic benefit to another entity that would be met in the future.
  • Second characteristic: The responsibility forces the company so that it cannot avoid the future sacrifice.
  • Third characteristic: The transaction or other event forcing the business entity has already occurred...

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