ABC has historically used the cost method for valuing inventory for tax purposes and does not wish to apply for a method change. During the year, auditors require a $$250$ million inventory write$-$down to market for book purposes.

A$.$ Will this write$-$down lead to an originating book$-$tax difference in the current year?

a$.$ Yes

b$.$ No

c$.$ Not applicable

B$.$ After the write$-$down, will book carrying value or tax basis in the inventory be higher?

a$.$ Book

b$.$ Tax

c$.$ Not applicable

C$.$ If there is a book$-$tax difference, will it be temporary or permanent?

a$.$ Temporary

b$.$ Permanent

c$.$ Not applicable

D$.$ Will the originating book$-$tax difference be favorable or unfavorable?

a$.$ Favorable

b$.$ Unfavorable

c$.$ Not applicable

E$.$ Would this book$-$tax difference be a deferred tax asset or deferred tax liability?

a$.$ Deferred Tax Asset $($DTA$)$

b$.$ Deferred Tax Liability $($DTL$)$

c$.$ Not applicable