The GAAP Solution for Avoiding Distortions That Would Result from Setting

question 87

Multiple Choice

The GAAP solution for avoiding distortions that would result from setting income tax expense equal to taxes owed is called

• A)intraperiod tax allocation.
• B)interperiod tax allocation.
• C)book income allocation.
• D)intraperiod book allocation of income.

---

Definitions:

Average Cost

The total cost of production divided by the number of units produced, indicating the cost per unit.

Consumer Surplus

The bifurcation between what a consumer wishes to pay for a service or good, and what ends up being spent.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual market price of the good.

Deadweight Loss

Deadweight loss refers to the loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable, often due to market distortion such as taxes or subsidies.