Reference no: EM132505231

Fisk, Inc., purchased $600,000 of construction equipment on January 1, 2019. The equipment is being depreciated on a straight-line basis over six years with no expected salvage value. MACRS depreciation is being used on the firm's tax returns. At December 31, 2021, the equipment's book value is $300,000 and its tax basis is $173,000 (this is Fisk's only temporary difference). Over the next three years, straight-line depreciation will exceed MACRS depreciation by $31,000 in 2022, $31,000 in 2023, and $65,000 in 2024. Assume that the income tax rate in effect for all years is 25%.

Question 1: Where should the deferred tax liability accounts be classified in Fisk's balance sheets?

Option 2: Deferred tax liabilities are recorded as noncurrent liabilities on the balance sheet.

Option 3: Deferred tax liabilities are recorded as current liabilities on the balance sheet.

Option 4: Deferred tax liabilities are recorded as current and/or noncurrent liabilities on the balance sheet, depending on when they are due.

Option 5: Deferred tax liabilities are not reported on the balance sheet, rather they are disclosed in the Notes to the Financial Statements.