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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
- Which of the following best describes the distinction between expenses and losses?
- Losses are material items whereas expenses are immaterial items
- Losses are extraordinary charges whereas expenses are ordinary charges
- Losses are reported net-of-related-tax effect whereas expenses are not reported not-of- tax
- Losses results from peripheral or incidental transactions whereas expenses result from ongoing major or central operations of the entity
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- Under IAS 1 an entity must present a statement of profit or loss and other comprehensive income. Which of the following statements is true in respect of the other comprehensive income section? 1. Items should be grouped into those that may subsequently be reclassified to profit or loss and those that will not subsequently be reclassified to profit or loss. 2. All items must be shown inclusive of income tax 3. Extraordinary items should be listed separately with details of the nature of the item disclosed in the notes. Please select the right answer. All of the above 1 and 2 only 2 only 1 onlyarrow_forwardCorporate taxable income is based on an income statement that is similar to income statements prepared for financial reporting. It has Revenues less expenses equals income. How is the computation for personal taxable income different from this income statement concept? Why do you think these differences exist?arrow_forwardGenerally accepted accounting principles usually require the use of accrual accounting to “fairly present” income. If the cash receipts and disbursements method of accounting will “clearly reflect” taxable income, why does this method not usually also “fairly present” income?arrow_forward
- A temporary difference which would result in a deferred tax liability is a) installment sale included in accounting income at the time of sale but not in tax incomeb) subscription received in advancec) research cost is recognized as expense in accounting income but not in tax incomed) Dividend revenue on equity investmentarrow_forwardWhen an expenditure is made and it is treated as an expense but should have been capitalized, the resulting impact in the year of the expenditure would be: A. Assets would be overstated, net income would be understated. B. Both the assets and net income would not be affected. C. Assets would be understated, net income would be understated. D. Assets would be understated, net income would be overstated.arrow_forwardIn computing net business income for income tax purposes, which of the following statements is INCORRECT? Question 3Answer a. Income tax paid is not allowed as a business deduction. b. Depreciation is not allowed as a business deduction. c. Capital cost allowance is not allowed as a business deduction. d. An arbitrary reserve is not allowed as a business deduction.arrow_forward
- How is a business activity distinguished from an investment activity? why is this distinction important for the purpose of calculating federal income taxes? What types of losses may potentially be characterized as passive losses?arrow_forwardA company uses the equity method to account for an investment for financial reporting purposes. This would result in what type of difference and in what type of deferred income tax? Oa. Type of Difference Permanent Ob. Ives of Difference Permanent Oc. Ives of Difference Temporary Od. Type of Difference Temporary Deferred Tax Asset Deferred Tax Liability Deferred Tax Asset Deferred Tax Liabilityarrow_forwardWhat is the accounting treatment for discontinued operations? A : It is reported at its gross amount as an "other revenue or gain" or "other expense or loss". B : It is reported as an "other revenue or gain" or "other expense and loss", net of tax. C : It only needs to be disclosed in the footnotes of the financial statements. D : It may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss).arrow_forward
- Assets are creditors claims on assets. These claims reflect company obligations to provide assets, products or services to others True B Falsearrow_forwardIf a company has elected the fair value option, where are gains and losses resulting from adjusting these accounts to fair value reported? Group of answer choices Unrealized Gains are reported as part of Other Comprehensive Income while Unrealized losses are reported as part of Net Income. Unrealized Gains and Losses are both reported as part of Net Income. Unrealized Gains are reported as part of Net Income, while Unrealized Losses are reported as part of Other Comprehensive Income. Unrealized Gains and Losses are both reported as part of Other Comprehensive Income.arrow_forwardWhich of the following causes a temporary difference between taxable and pretax accounting income? A. Investment expenses incurred to generate tax-exempt income. B. MACRS used for depreciating equipment. C. The dividends received deduction. D. Life insurance proceeds received due to the death of an executive.arrow_forward
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