Everwood Co

question 17

Multiple Choice

Everwood Co.had net income of $1,000,000 for the year ending December 31,2015,its first year of operations.During this time period,Everwood also had a permanent tax difference of $120,000 and its adjusted pre-tax book income is $1,220,000.Analysts have approximated Everwood's taxable income at $735,000 for the year ending December 31,2011.Which of the following most likely caused the difference between Everwood's book and tax income?

• A)Accrued warranty expenses not yet deductible on the tax return.
• B)A net operating loss carryback.
• C)Purchases of long-lived capital assets.
• D)Premiums paid on life insurance on key executives where the company is the beneficiary.

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Definitions:

Average Total Cost

The total cost of production divided by the number of units produced, providing a per-unit cost of production.

Oligopolistic Industry

A market structure characterized by a small number of firms that have the power to influence the price of their products or services.

Competitive Price Searchers

Businesses that operate in markets with many competitors and product differentiation, where they have to search for the optimal price to balance attracting customers and earning profits.