Final answer:
The statement is false; income tax expense is not always reported last before net income on a single-step income statement. Corporate income taxes reflect the cost to a corporation of taxes paid on profits. The effective tax rate is applied to the company's income statement earnings, considering tax benefits and deductions.
Step-by-step explanation:
The statement that income tax expense is reported as the last item before net income on a single-step income statement is false. Typically, in a single-step income statement, revenues and expenses are listed together without differentiation between operating and non-operating categories, and the expenses are not listed in any particular order.
The income tax expense is an important component of calculating net income, but it is not always presented last. To calculate after-tax income, the tax amount is subtracted from the pre-tax income, which could be represented in various places on an income statement, depending on the company’s reporting practices.
Corporate income taxes are a significant federal revenue source, and the corporate tax rate is applied to a company's profits. These tax expenses, reported on the income statement, reflect the cost of taxes the corporation must pay out of its profits. The effective tax rate is applied to the company's financial statement income, and this rate reflects the average tax after factoring in benefits and deductions relevant to the current tax year.