The Result of Interperiod Income Tax Allocation Is That

question 20

Multiple Choice

The result of interperiod income tax allocation is that

• A) wide fluctuations in a company's tax liability payments are eliminated.
• B) tax expense shown in the income statement is equal to the deferred taxes shown on the balance sheet.
• C) tax liability shown in the balance sheet is equal to the deferred taxes shown on the previous year's balance sheet plus the income tax expense shown on the income statement.
• D) tax expense shown on the income statement is equal to income taxes payable for the current year plus or minus the change in the deferred tax asset or liability balances for the year.

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Definitions:

Convertible Debt

A type of bond or other form of debt that can be converted into a specified number of shares of the issuing company's stock at certain times during its life.

GAAP

Generally Accepted Accounting Principles, a set of accounting standards, principles, and procedures that companies must follow when compiling their financial statements.

APB

The Accounting Principles Board, which was an organization that set standards for financial reporting and accounting in the past, succeeded by the FASB.

Effective Interest Method

A technique used in finance to calculate the actual interest rate on a bond or loan, considering compounding over the term.