Deferred tax asset / liability

9. In 2009, Magic Table Inc. decides to add a 36-month warranty on its new product sales. Warranty costs are tax deductible when claims are settled. In its financial statements for 2009, Magic Table Inc incurs:

A. An increase in a deferred tax asset.
B. A decrease in a deferred tax asset.
C. An increase in a deferred tax liability.
D. A decrease in a deferred tax liability

Solution Summary

The solution explains the impact of warranty costs on deferred taxes