Upon Reading the Notes to the Financial Statements of JMR

question 77

Multiple Choice

Upon reading the notes to the financial statements of JMR Ltd.,you notice that the policies they have chosen tend to recognize revenue early in the earnings cycle while deferring costs to later periods.This approach leads you to believe that JMR Ltd.is employing a(n) :

• A) Smoothing strategy.
• B) Income tax minimization strategy.
• C) Income tax maximization strategy.
• D) Profit maximization strategy.

---

Definitions:

Decentralization

The distribution of decision-making power away from a central authority, allowing for greater autonomy at lower levels of an organization.

Authority

The power or right to give orders, make decisions, and enforce obedience.

Support Department Allocation Rates

Ratios or percentages used to distribute the costs of support departments to producing or service departments based on agreed-upon methods.

Operating Income

The amount of profit realized from a business's operations after deducting operating expenses such as wages, depreciation, and cost of goods sold.