In any given accounting period, the amount a firm reports as income before income taxes for financial reporting in comparison to the amount of taxable income that appears on its income tax return may differ due to permanent differences.Permanent differences include

Question

Quizplus · Accepted Answer

Interest revenue on municipal bonds is exempt from federal income tax, resulting in a permanent difference between financial reporting income and taxable income. Option B is incorrect because depreciation is temporary and can be adjusted to match tax reporting. Options C and D are incorrect because bad debt expense and warranty expense are both deductible for tax purposes, and therefore do not result in permanent differences.

In Any Given Accounting Period, the Amount a Firm Reports