McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 25

As part of its UTP assessment, Penobscot Company records interest and penalties related to its tax contingency amount of $500,000. Which of the following statements about recording this amount is most correct
a. Penobscot must include the amount in its income tax provision.
b. Penobscot must record the amount separate from its income tax provision.
c. Penobscot can elect to allocate a portion of the amount to both its income tax provision and its general and administrative expenses provided the company discloses which option it chose.
d. Penobscot can elect to record the entire amount as part of its income tax provision or separate from its income tax provision, provided the company discloses which option it chose.
e. Statements c and d above are both correct.