What distinguishes constructive obligations from legalobligations in accounting?a) They arise from established patterns of past practiceb) They only exist in written contractsc) They never require recordingd) They apply only to tax liabilities

Explanation of Constructive Obligations: Constructive obligations are commitments that arise from…

Answered: What distinguishes constructive…

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter3: Business Income And Expenses

Section: Chapter Questions

Problem 1MCQ

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Which of the following is a temporary difference that normally is recognized for accounting purposes before being reported as an expense for tax purposes? Unearned revenue Product warranty costs Depreciation Fines resulting from violations of the law.
Select accurate Option
Financial Accounting
Which of the following is not an administrative remedy available to the government? a. Assessment b. Distraint C. Tax Avoidance D. Tax Lien
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None
Which of the following statements is NOT correct? A. Taxable income and accounting profit may differ due to differences between the recognition of revenue and expenses for tax and accounting purposes. B. Deferred tax assets must be assessed for the probability of their recovery. Creation of a deferred tax asset or liability occurs only if it reverses at some future date. OC. Deferred tax assets and liabilities may arise due to temporary differences between accounting profit and taxable income. D. Deferred tax liabilities may arise due to permanent differences between accounting profit and taxable income.
Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes. Which of the following items are of that type? a. Warranty costs b. Goodwill impairment c. Fines d. Entertainment expenses e. Prepaid insurance
True or False. The Internal Revenue Code authorizes deductions for trade or business activities if the expenditure is "ordinary and necessary"
A debt restructuring that involves a modification of terms and does not require court approval may not require the recognition of subsequent interest expense. True or False
Why should executory contracts be disclosed in the financial statements? Group of answer choices They create current income tax obligations They create an obligation contingent upon the occurrence of a past event They represent a possible outflow of economic resources None of the above PreviousNext
A company receives advance payments from customers that are immediately taxable butwill not be recognized for accounting purposes until the company fulfi lls its obligation.Th e company will most likely record:A . a deferred tax asset.B . a deferred tax liability.C . no deferred tax asset or liability.

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What distinguishes constructive obligations from legal obligations in accounting? a) They arise from established patterns of past practice b) They only exist in written contracts c) They never require recording d) They apply only to tax liabilities