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Problem 1: A company fraudulently inflates the income it reports to its shareholders. However, it is truthful on its tax return. Which one of the following best describes the impact of this fraud on the deferred tax assets and liabilities? Assume that the tax rate is NOT ZERO.
a. Deferred tax assets will increase or deferred tax liabilities will increaseb. Deferred tax assets will increase or deferred tax liabilities will decreasec. Deferred tax assets will decrease or deferred tax liabilities will increased. Deferred tax assets will decrease or deferred tax liabilities will decrease
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