AICPA Exam CPA-Financial Topic 1 Question 83 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 83
Topic #: 1

For interim financial reporting, the computation of a company's second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. The effective tax rate should reflect anticipated:

AOption A

BOption B

COption C

DOption D

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Deficits accumulated during the development stage of a company should be reported as a part of stockholders' equity.

Rule: Development stage enterprises should present FS in accordance with GAAP and make additional disclosures such as: cumulative net losses, cumulative deficit (as part of equity), cumulative sales & expenses (part of I/S), cumulative statement of cash flows and supplementary 'shareholders equity.'

Choices 'a', 'c', and 'd' are incorrect, per the rule above.

by James at Mar 21, 2024, 06:01 PM

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9 days ago

Option C seems to be the correct answer here. The effective tax rate should reflect anticipated changes in the mix of income earned in different jurisdictions, as well as changes in tax laws and regulations.

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