There Is No Recognition of a Deferred Tax Item in Respect

question 26

Multiple Choice

There is no recognition of a deferred tax item in respect to Goodwill because it is a residual amount and the recognition of a deferred tax item would:

• A) decrease the carrying amount of Goodwill;
• B) increase the carrying amount of Goodwill;
• C) decrease the profit on consolidation;
• D) increase the profit on consolidation.

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Definitions:

Margin of Safety

The difference between actual sales and breakeven sales, indicating how much sales can decrease before a business incurs a loss.

Variable Expenses

Expenditures that fluctuate in tandem with operational activity levels, including costs like utilities and commissions.

Net Income

The total profit of a company after all expenses, including taxes and operating expenses, are subtracted from total revenue.

Break-Even Point

The point at which the amount produced or sold results in total income matching total costs, leading to neither a profit nor a loss.