Final answer:
A warranty liability gives rise to a deductible temporary difference, which leads to a deferred tax asset as warranty expenses are recognized for financial reporting when sales occur but deducted for tax when paid.
Step-by-step explanation:
The question concerns which differences give rise to a deductible temporary difference for Hot Sauce Corp. (HSC) after its first year of operations. Among the options given, a warranty liability would give rise to a deductible temporary difference. This occurs because warranty expenses are often incurred in the future, but they are recognized for financial reporting purposes when the related sales occur. As for accounting, firms can deduct warranty expenses for tax purposes when they are actually paid, which may be in periods subsequent to the recognition of the revenue to which they relate. This creates a temporary difference between the book income and the taxable income, leading to a deferred tax asset.