Which of the Following Statements Regarding Book-Tax Differences Is True

question 33

Multiple Choice

Which of the following statements regarding book-tax differences is true?

• A)Corporations are not required to report book-tax differences on their income tax returns.
• B)Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences.
• C)Income excludable for tax purposes usually creates a temporary book-tax difference.
• D)None of the choices are correct.

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Definitions:

Quality of Income Ratio

A metric that measures the proportion of income that comes from core business operations, indicating the reliability of a company's earnings.

Indirect Method

A way of reporting cash flows from operating activities by adjusting net income for changes in balance sheet accounts.

Operating Activities

Transactions that relate to the primary operations of a company, such as sales and service provision.

Indirect Method

A cash flow statement approach that adjusts net income for changes in non-cash working capital and other items to calculate operating cash flow.