Under the liability method for calculating future taxes, income tax expense is calculated using:
A)tax return income × tax rate.
B)book income × tax rate.
C)taxes payable + changes in future tax assets and liabilities.
D)book income x tax rate + changes in future tax assets and liabilities.

Question

Quizplus · Accepted Answer

Income tax expense under the liability method is calculated as taxes payable (which is based on tax return income) plus or minus changes in deferred tax assets and liabilities. This reflects both the current tax effect and the future tax effects of transactions reported in the financial statements.

Under the Liability Method for Calculating Future Taxes, Income Tax