객관식
Which of the following is NOT a primary role of an independent auditor?
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1. Introduction to Accounting
Types of Accounting
객관식
Which of the following items is NOT an adjustment to taxable income or net loss when computing current earnings and profits (E&P)?
A
Dividends received deduction
B
Federal income tax refunds received
C
Tax-exempt interest income
D
Life insurance proceeds on key employees
검증된 단계별 안내1
Step 1: Understand the concept of Earnings and Profits (E&P). E&P is a measure used in tax accounting to determine a corporation's ability to pay dividends to shareholders. It is calculated by adjusting taxable income for certain items, both additions and subtractions.
Step 2: Review the adjustments typically made to taxable income or net loss when computing E&P. These adjustments include items such as tax-exempt income, non-deductible expenses, and certain deductions that are allowed for tax purposes but excluded from E&P calculations.
Step 3: Analyze each option provided in the problem: Dividends received deduction, Federal income tax refunds received, Tax-exempt interest income, and Life insurance proceeds on key employees. Determine whether each item is typically included or excluded in the computation of E&P.
Step 4: Note that the Dividends Received Deduction (DRD) is a tax deduction allowed to corporations for dividends received from other corporations. While it reduces taxable income, it is not an adjustment to E&P because E&P focuses on the corporation's ability to pay dividends, not tax deductions.
Step 5: Conclude that the correct answer is the Dividends Received Deduction, as it is not an adjustment to taxable income or net loss when computing current E&P. The other items (Federal income tax refunds, tax-exempt interest income, and life insurance proceeds) are adjustments to E&P because they affect the corporation's financial ability to pay dividends.
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