Knollcrest Corporation Has a Cumulative Book Loss Over the Past

question 18

Multiple Choice

Knollcrest Corporation has a cumulative book loss over the past 36 months. Which of the following statements best describes how this fact enters into the valuation allowance analysis?

• A)The book loss is considered sufficient negative evidence that a valuation must be recorded.
• B)The book loss is considered negative evidence that must be evaluated along with other evidence as to whether a valuation allowance should be recorded.
• C)The book loss is not considered negative evidence because it relates to book income and not taxable income.
• D)A cumulative book loss is considered negative evidence only after a period of 60 months.

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