Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 75

For the following questions, circle the best response.

The accounting for deferred income taxes is a controversial topic because

a. it is sometimes unclear whether deferred income taxes will ever have to be paid by companies that continue to grow (in total assets).

b. estimating future tax rates that should be used in current calculations is difficult because changes in the tax code are difficult to project.

c. price-level increases have caused the replacement cost of assets to be higher than the original costs of assets being replaced.

d. new temporary differences originating on assets being purchased during the current year are often larger in dollar amount than old temporary differences reversing on assets purchased in prior years.

e. all of the above.

Step 1 of 6

(a)

Accounting for deferred income taxes is a controversial topic because it sometimes unclear whether deferred income taxes will every have to be paid by companies that continue to grow (in total assets). These new assets can offset deferred income taxes.