What Is Often the Main Motivation Behind the Practice of Taking

question 1

Multiple Choice

What is often the main motivation behind the practice of taking a "big bath" in a loss year?

• A)To minimize income taxes
• B)To smooth income
• C)To maximize asset book values
• D)To increase future years' earnings

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Definitions:

Service Revenue

Income earned by a company for the services it has provided to its customers.

Utilities Expense

Costs incurred by a business for basic services such as electricity, water, and gas, classified under operating expenses in the income statement.

Owner's Drawings

Funds taken out of a business by the owner in a sole proprietorship or partnership for individual purposes.

Capital Account

An account showing the net worth of a business at a specific point in time, comprised of the owner's equity, investments, and retained earnings.