Which of the Following Is an Argument That an Advocate

question 18

Multiple Choice

Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position?

• A) Income taxes result from taxable income.
• B) Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.
• C) Nonallocation of income taxes hides an economic difference between a company that employs tax strategies that reduce current tax payments than one that does not.
• D) Income taxes are not incurred in anticipation of future benefits, nor are they expirations of cost to provide facilities to generate revenues.

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Definitions:

Applied Factory Overhead

Indirect costs related to manufacturing, allocated to goods based on a predetermined rate.

Direct Labor

The wages or expenses directly associated with the manufacturing of products or delivery of services.

Continuous Process

A production process that is non-stop and operates continuously over long periods.

Applied Factory Overhead

The portion of overhead costs that are allocated to produced goods based on a predetermined rate or method.