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Answer: B,C

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An insurance company received prepaid insurance revenue of $10,000 for next year from a local construction firm. The insurance company treats this as unearned revenue for financial reporting purposes. The local tax legislation requires that $8,000 to be treated as taxable income for the current year. As a result, a ______ should be created.
A. Deferred tax asset of $8,000.
B. Deferred tax liability of $8,000.
C. Deferred tax liability of $2,000.
Answer: A
Explanation:
The carrying amount and tax base of the liability are $10,000 and $2,000, respectively.

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