Consider the following statements: Statement 1: When the tax base of a liability exceeds its carrying value, it results in a deferred tax asset. Statement 2: Permanent differences result in a difference between the company’s statutory and effective tax rate. Which of the following is most likely?
A
Only Statement 2 is correct.
explanation
• When the tax base of a liability exceeds its carrying value, it results in a deferred tax liability. • Statement 2 is correct.
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