A company recognises a liability of $300 for accrued product warranty costs. As is the case for many accrued expenses, the Australian Taxation Office (ATO) does not treat the expenses as deductible until the entity actually meets the claims.

REQUIRED

a. Assuming that the tax rate is 30 per cent, what is the amount of the temporary difference?

b. Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability?