Which of the Following Best Describes How the Tax Benefit

question 57

Multiple Choice

Which of the following best describes how the tax benefit resulting from the extraordinary loss in an interim period is recognized?

• A)​The tax benefit is recognized in the period in which it occurs using the estimated effective rate.
• B)​The tax benefit is recognized in the period in which it occurs using the average tax rate for all income.
• C)​The tax benefit is allocated over the current and remaining periods using the estimated effective rate.
• D)​The tax benefit is recognized only if, more likely than not, the loss may be offset against income.

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Definitions:

Profitable Projects

Initiatives or plans that are expected to generate earnings exceeding their costs.

Target Capital Structure

The combination of borrowing, ownership stakes, and additional financing methods a business intends to employ for its operational and expansion activities.

Target Dividend Payout

A company's goal or policy regarding the percentage of earnings it aims to pay out to shareholders in the form of dividends.

Positive NPV Projects

Projects for which the Net Present Value (NPV) is greater than zero, indicating that they are expected to generate a profit above the cost of capital.