Which of the Following Is an Argument That an Advocate

question 18

Multiple Choice

Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position?

• A) Income taxes result from taxable income.
• B) Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.
• C) Nonallocation of income taxes hides an economic difference between a company that employs tax strategies that reduce current tax payments than one that does not.
• D) Income taxes are not incurred in anticipation of future benefits, nor are they expirations of cost to provide facilities to generate revenues.

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Definitions:

Partial Equity Method

An accounting method used when an investing entity holds a significant but not controlling interest in another entity, recording the investment at cost and recognizing a proportionate share of the investee's earnings.

Consolidated Entity

A group of companies that includes a parent and its subsidiaries, for which financial performance is presented in a single set of financial statements.

Book Value

The net value of a company's assets as recorded on the balance sheet, excluding intangible assets like goodwill.

Fair Value

Fair Value is the estimated market value of an asset or liability, based on current prices in an open market, used for financial reporting.