Which of the Following Approaches to Interperiod Tax Allocation Best

question 9

Multiple Choice

Which of the following approaches to interperiod tax allocation best represents an example of the matching principle?

• A) The deferred method of interperiod income tax allocation
• B) Discounting deferred income taxes
• C) Nonallocation of income taxes
• D) The asset/liability method of income tax allocation.

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Definitions:

Outstanding Receivables

Amounts due to a company for goods or services that have been delivered or sold but not yet paid by customers.

Allowance for Doubtful Accounts

A contra asset account that reflects the estimated amount of accounts receivable that may not be collectible.

Notes Receivable

Written promises for amounts to be received by a business, usually detailing interest and the due date for repayment.

Cash Loan

A type of loan where the borrower receives a cash amount upfront and agrees to pay back both the principal and interest over a set period.