With Respect to the Difference Between Taxable Income and Pretax

question 34

Multiple Choice

With respect to the difference between taxable income and pretax accounting income, the tax effect of the undistributed earnings of a subsidiary included in consolidated income should normally be

• A) Accounted for as a timing difference
• B) Accounted for as a permanent difference
• C) Ignored because it must be based on estimates and assumptions
• D) Ignored because it cannot be presumed that all undistributed earnings of a subsidiary will be transferred to the parent company

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Definitions:

Opiates

A group of narcotics derived from the opium poppy that provide a euphoric rush and depress the nervous system.

Opium Poppy

A flowering plant from which opium and many opiates, including morphine and codeine, are derived.

Narcotics

Drugs used to relieve pain and induce sleep; the term is usually reserved for opiates.

Euphoric Rush

A sudden, intense feeling of happiness, excitement, or well-being often experienced spontaneously or as a result of certain stimuli or activities.