With Respect to the Difference Between Taxable Income and Pretax

question 34

Multiple Choice

With respect to the difference between taxable income and pretax accounting income, the tax effect of the undistributed earnings of a subsidiary included in consolidated income should normally be

• A) Accounted for as a timing difference
• B) Accounted for as a permanent difference
• C) Ignored because it must be based on estimates and assumptions
• D) Ignored because it cannot be presumed that all undistributed earnings of a subsidiary will be transferred to the parent company