Janice is an accountant for Fine Foods Inc. (FFI), a public company, and is working on calculating
Question:
Janice is an accountant for Fine Foods Inc. (FFI), a public company, and is working on calculating FFI's deferred taxes. FFI is in the midst of a lawsuit with a customer over a batch of contaminated mayonnaise and has recorded a provision for the potential settlement. Janice knows that this lawsuit may result in deferred taxes. Which of the following statements regarding the accounting basis and tax basis for FFI's lawsuit is true?
A. The accounting basis of the lawsuit provision is nil.
B. If the amount is legally payable at year end, the tax basis is nil.
C. The accounting basis and the tax basis are always the same.
D. If the amount is not legally payable at year end, the tax basis is nil.
Managing Business Ethics Making Ethical Decisions
ISBN: 9781506388595
1st Edition
Authors: Alfred A. Marcus, Timothy J. Hargrave