CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

When using the liability method, income tax expense is calculated by ______
A. adding the deferred tax asset to the income taxes payable.
B. determining the amount required to "plug" the entry after the income taxes payable, deferred tax asset, and deferred tax liability have been calculated and put into the entry.
C. applying the current year's rate to pretax accounting income.
Explanation: Income tax expense is always the amount necessary to make the entry balance, after the income taxes payable, deferred tax asset, and deferred tax liability have been computed.

User Contributed Comments 5

User Comment
kalps Income tax expense: Balancing item once: (a) Income tax payable (b) deferred tax asset (3) deferred tax liability have been calculated
gene80 i see tt but what was wrong with D? Could it be because the question asked for "using the liability method"?
CoffeeGirl tax expense = tax payable + change in deferred tax liaiblity - change in deferred in tax asset.
tax payable > tax expense = deferred tax asset
tax payable < tax expense = deferred tax liability.
gill15 I dont know whats wrong with C either...
nguyenluan I think C is wrong because the question says we have to use "the liability method". C is using the income statement pretax accounting income, nothing from the balance sheet.
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