The incremental income tax effect utilized to determine the tax effect of an extraordinary item is calculated by:
A)applying the estimated effective tax rate against the amount of the extraordinary item
B)the difference between the gross tax calculated on continuing operations and the gross tax on income from all sources
C)the difference between the estimated net tax calculated on the projected annual income from continuing operations and the estimated net tax calculated on projected annual income, including the non-ordinary items
D)none of the above.

Question

The incremental income tax effect utilized to determine the tax effect of an extraordinary item is calculated by:
A)​applying the estimated effective tax rate against the amount of the extraordinary item
B)​the difference between the gross tax calculated on continuing operations and the gross tax on income from all sources
C)​the difference between the estimated net tax calculated on the projected annual income from continuing operations and the estimated net tax calculated on projected annual income, including the non-ordinary items
D)​none of the above.

Quizplus · Accepted Answer

The incremental income tax effect is determined by comparing the estimated net tax on projected annual income from continuing operations with the estimated net tax on projected annual income including extraordinary items.

The Incremental Income Tax Effect Utilized to Determine the Tax