The Transactions Listed in the Following Questions Occurred in a Private,not-For-Profit

question 38

Multiple Choice

The transactions listed in the following questions occurred in a private,not-for-profit hospital during 20X8.For each transaction,indicate its effect on the hospital's statement of operations for the year ended December 31,20X8.
-Transaction: Endowment income was earned.The donor placed no restrictions on the investment earnings.
Effect on Statement of Operations:

• A)Increases operating income.
• B)Decreases operating income.
• C)The transaction is reported on the statement of operations,but there is no effect on operating income.
• D)The transaction is not reported on the statement of operations.

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Definitions:

Tax Accounting

A method of accounting that focuses on taxes rather than the appearance of public financial statements.

Deferred Tax Liability

Deferred Tax Liability is a tax that is assessed or is due for the current period but has not yet been paid, often resulting from timing differences between book and tax deductions.

Economic Depreciation

A decrease in the value of an asset due to changes in market conditions or technology, as opposed to physical wear and tear.

Tax Deductible

Expenses that can be subtracted from gross income to reduce taxable income, effectively lowering the overall tax liability.