What is the relationship between deferred tax and depreciation? Option: "Deferred tax is the sum of depreciation over time", "Deferred tax is independent of depreciation", "Deferred tax is calculated as a percentage of depreciation", "Deferred tax is the inverse of depreciation

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What is the relationship between deferred tax and depreciation?

"Deferred tax is the sum of depreciation over time"

"Deferred tax is independent of depreciation"

"Deferred tax is calculated as a percentage of depreciation"

"Deferred tax is the inverse of depreciation

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What is the primary reason for the existence of 'Deferred tax liability' on a balance sheet?

Unpaid taxes from previous years

Penalties for late tax payments

Overpayment of taxes in the current year

Discrepancies in depreciation treatment between accounting and tax regulations

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What is the relationship between accumulated depreciation on the balance sheet and current year depreciation on the P&L?

Current year depreciation is subtracted from accumulated depreciation.

Accumulated depreciation is a percentage of current year depreciation.

They are unrelated.

Accumulated depreciation is the sum of all past years' depreciation, including the current year.

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What is the key difference between depreciation and amortization?

Depreciation is calculated on a straight-line basis, while amortization uses a declining balance method

Depreciation applies to tangible assets, while amortization applies to intangible assets

Depreciation is recorded on the balance sheet, while amortization is recorded on the income statement

Depreciation is a non-cash expense, while amortization is a cash expense

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What is the base rule used for in forecasting accumulated depreciation?

To estimate the useful life of assets.

To determine the salvage value of assets.

To calculate the depreciation rate for the current year.

To add the current year depreciation to the previous year's accumulated depreciation.

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How can the method of proportions be used to forecast depreciation?

By multiplying the previous year's depreciation by the current year's gross block.

By calculating the ratio of depreciation to gross block for historical years and applying the average to future years.

By using complex statistical models to predict future depreciation trends.

By dividing the current year's gross block by the previous year's depreciation.