Depreciation and amortization affect both net income reported in the financial statements and taxable income on tax returns. Which of the following is /are true?
A)Taxing authorities in most jurisdictions specify allowable depreciation methods for tax reporting.
B)When permitted to do so by the taxing authority, firms often use different depreciation methods for financial and tax reporting.
C)The difference between depreciation expense in the financial statements and the depreciation deduction on the tax return leads to an issue in accounting for income taxes.
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

All of the statements are true. Taxing authorities usually specify the allowable depreciation methods for tax reporting, but firms may choose to use different methods for financial and tax reporting if permitted by the taxing authority. The difference between depreciation expense in the financial statements and the depreciation deduction on the tax return can lead to differences in taxable income and accounting for income taxes.

Depreciation and Amortization Affect Both Net Income Reported in the Financial