Question

which of the following are true about income tax expense? multiple select question. income tax expense results from the combination of current taxes payable and changes in deferred taxes. income tax expense includes both current and deferred portions. income tax expense is calculated directly. income tax expense is not affected by the valuation allowance.

Answer 1

Income tax expense is the amount of money that a company must pay in income taxes, based on the profits it earned in a specific period. It includes both current and deferred taxes and is calculated based on taxable income. The valuation allowance can affect income tax expense.

Step-by-step explanation:

Income tax expense is the amount of money that a company must pay in income taxes based on the profits it earned during a specific period. It includes both the current taxes payable and any changes in deferred taxes. The calculation of income tax expense is based on the taxable income, which is the adjusted gross income minus deductions and exemptions.

Income tax expense is not calculated directly, but rather it is determined by applying the applicable tax rates to the taxable income. The tax rates vary based on income levels and may be different for federal, state, and local taxes.

The valuation allowance does affect income tax expense. A valuation allowance is a contra account that reduces the value of deferred tax assets, which are future tax benefits. If a company determines that it is more likely than not that the deferred tax assets will not be realized, it creates a valuation allowance to reduce the amount recognized as income tax expense.