Which of the Following Statements About Accounting Estimates Is True

question 49

Multiple Choice

Which of the following statements about accounting estimates is true?

• A)Accounting estimates are disclosed in the notes to the financial statements.
• B)Acceptable accounting estimates are covered by GAAP.
• C)Accounting estimates are necessary because economic events and transactions are not known with certainty.
• D)Accounting estimates do not have a significant impact on reported earnings.

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Definitions:

AMT Calculation

The process of determining the amount of Alternative Minimum Tax an individual or corporation owes by adjusting certain tax preference items and deductions.

AMTI

Stands for Alternative Minimum Taxable Income, which is calculated by adding certain tax preference items back into adjusted gross income.

Incentive Stock Options

A type of stock option that provides tax advantages for the employee, including delayed tax implications until the stock is sold.

AMT Adjustment

Adjustments and preferences added back to or subtracted from taxable income to calculate the Alternative Minimum Tax.