Which of the Following Items Is Not Considered Evidence in Determining

question 40

Multiple Choice

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

• A)A cumulative book loss over some period of time.
• B)Management projects future taxable income based on a backlog of signed contracts.
• C)A net operating loss expired unused in the current year.
• D)Management can implement a tax strategy to create future taxable income, but it will be detrimental to the future profitability of the company.

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Definitions:

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment or product line.

Variable Costing

A bookkeeping approach that incorporates only variable production expenses such as direct materials, direct labor, and variable manufacturing overhead into the costs of products.

Net Operating Income

A company's operating income after all operating expenses have been deducted from total revenue.

Variable Costing

A costing method that includes only variable costs - costs that vary with production levels - in the cost of goods sold and excludes fixed costs.