The Incremental Income Tax Effect Utilized to Determine the Tax

question 49

Multiple Choice

The incremental income tax effect utilized to determine the tax effect of an extraordinary item is calculated by:

• A) applying the estimated effective tax rate against the amount of the extraordinary item
• B) the difference between the gross tax calculated on continuing operations and the gross tax on income from all sources, before tax credits are applied.
• C) the difference between the estimated net tax calculated on the projected annual income from continuing operations and the estimated net tax calculated on projected annual income, including the non-ordinary items, after tax credits have been considered
• D) none of the above.

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Definitions:

Utility Analysis

An economic technique for measuring the satisfaction or benefit derived by consumers from consuming goods and services.

Indifference Curve

A graph showing different combinations of two goods that provide equal satisfaction and utility to a consumer.

Convex

In geometry and economics, convex refers to a shape or function that curves outward or has a bulging shape, often indicating a relationship where marginal effects increase over a range.

Concave

Describes a curve or surface that is curved inward, resembling the interior of a circle or sphere.