Which of the Following Statements Is Incorrect with Respect to Determining

question 105

Multiple Choice

Which of the following statements is incorrect with respect to determining current E & P?

• A) All tax-exempt income should be added back to taxable income.
• B) Dividends received deductions should be added back to taxable income.
• C) Current year charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.
• D) Federal income tax refunds should be added back to taxable income.
• E) None of the above statements are incorrect.

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Definitions:

Operating Activities

Transactions and events that impact the net income of a business, primarily related to its core operations.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement, starting with net income and adjusting for non-cash transactions.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Statement of Cash Flows

A financial report summarizing the amount of cash and cash equivalents entering and leaving a company.