Question

Accounting for income taxes can result in the reporting of deferred taxes as any of the following except

a. a curent or long-term asset
b. a current or long-term liability
c. a contra-asset account
d. all of these are acceptable methods of reporting deferred taxes

Answer 1

Deferred taxes can be reported as a current or long-term asset or liability but not as a contra-asset account. A T-account helps illustrate assets and liabilities but is not used for reporting deferred taxes as contra-assets.

Step-by-step explanation:

Accounting for income taxes can lead to the reporting of deferred taxes on a company's balance sheet. While it is correct that deferred taxes can be reported as either a current or long-term asset, and as a current or long-term liability depending on the circumstances, they cannot be reported as a contra-asset account. Contra-asset accounts are used to reduce the value of related assets, such as accumulated depreciation for fixed assets, not for recording deferred taxes.

The T-account is a visual aid used in accounting to represent a ledger account and is useful for understanding the concept of deferred taxes. The 'T' shape of a T-account separates assets on the left from liabilities on the right. However, the option 'c. a contra-asset account' does not apply to reporting deferred taxes. Therefore, the correct answer is that deferred taxes are reported as all of these except 'c. a contra-asset account'.