Question

which of the following is true regarding income tax expense? multiple choice question. tax expense is the amount of tax currently payable based on the current year's return. tax expense combines tax payable and changes in the deferred tax accounts.

Answer 1

Income tax expense includes both the current tax payable and adjustments to deferred tax accounts. It reflects the application of the effective tax rate to a company's financial statement income after deductions and credits.

Step-by-step explanation:

The correct statement regarding income tax expense is that it combines tax payable and changes in the deferred tax accounts. Income tax expense on the income statement encompasses both the amount of income tax currently due to government authorities, which is based on this year's taxable income, and adjustments to deferred tax assets or liabilities, which reflect the tax effects of timing differences between accounting and tax laws.

When computing taxable income, you start with adjusted gross income and then subtract deductions and exemptions. The effective tax rate on a company's income reflects both current and deferred tax and is influenced by various credits and tax benefits that may apply in the current tax year. Lastly, it's important to note that tax laws and rates can change over time due to policy decisions aimed at achieving economic and social goals, making the tax system a dynamic and often complex environment.