B is corrent. Per ASC Topic 740, such gains on involuntary conversions are to be recognized in the financial statements in the year they occur. Furthermore, the interpretation specifies that such a gain, which is not recognized for tax purposes in the same year as for financial accounting purposes, is a temporary difference. Therefore, a deferred tax liability of $30,000 (30% x $100,000) is necessary, since pretax accounting income exceeds taxable income by $100,000.
A is incorrect. Per ASC Topic 740, such gains on involuntary conversions are to be recognized in the financial statements in the year they occur. Furthermore, the interpretation specifies that such a gain, which is not recognized for tax purposes in the same year as for financial accounting purposes, is a temporary difference. Therefore, a deferred tax liability of $30,000 (30% x $100,000) is necessary, since pretax accounting income exceeds taxable income by $100,000.
A is incorrect. Per ASC Topic 740, such gains on involuntary conversions are to be recognized in the financial statements in the year they occur. Furthermore, the interpretation specifies that such a gain, which is not recognized for tax purposes in the same year as for financial accounting purposes, is a temporary difference. Therefore, a deferred tax liability of $30,000 (30% x $100,000) is necessary, since pretax accounting income exceeds taxable income by $100,000.
D is incorrect. Per ASC Topic 740, such gains on involuntary conversions are to be recognized in the financial statements in the year they occur. Furthermore, the interpretation specifies that such a gain, which is not recognized for tax purposes in the same year as for financial accounting purposes, is a temporary difference. Therefore, a deferred tax liability of $30,000 (30% x $100,000) is necessary, since pretax accounting income exceeds taxable income by $100,000.
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