The Correct Method for Calculating the Amount of a Deferred

question 34

Multiple Choice

The correct method for calculating the amount of a deferred tax liability or asset may be expressed as a formula as follows:

• A) (Carrying amount of assets or liabilities - tax bases of assets or liabilities) × tax rate
• B) Carrying amount of assets or liabilities - (tax bases of assets or liabilities × tax rate)
• C) Carrying amount of assets or liabilities - tax bases of assets or liabilities × tax rate
• D) Carrying amount of assets or liabilities - tax bases of assets or liabilities

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Definitions:

Opportunity Cost

The value of the best alternative that is foregone by choosing a particular action or decision, important in evaluating the cost of choices.

Alternative

An option among a set of choices in decision-making scenarios.

Total Costs

The sum of all expenses incurred by a business in producing goods or services, including fixed and variable costs.

Prime Cost

Direct materials cost plus direct labor cost.