The tax components of continuing operations typically include which of the following:

Question

Options

• AChanges in tax status
• BDiscontinued operations
• CExtraordinary items
• DAll of the above

• A
  17% (8)
• B
  8% (4)
• C
  4% (2)
• D
  71% (34)

Explanation

Option D is correct because under intraperiod tax allocation rules (ASC 740), income tax expense must be allocated across all components of comprehensive income - including continuing operations, discontinued operations, and extraordinary items - and changes in tax status are recognized within continuing operations, making all three relevant tax components. The distractors A, B, and C are not wrong in isolation; the error lies in choosing any one of them alone, since each represents only part of the full picture. Choosing A alone would ignore that discontinued operations and extraordinary items also carry allocated tax effects; choosing B or C alone similarly ignores the others. The key insight is that intraperiod tax allocation is comprehensive - it touches every income component, not just one.

Memory tip: Think of the acronym DCE - Discontinued operations, Changes in tax status, Extraordinary items - as the three major "special" tax components. If a question lists all three together, the answer is almost always "all of the above," because tax allocation rules require covering the complete income statement.

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