Kling Corporation reports a $150,000 cash tax savings from a temporary book-tax difference. This item has the same effect on Kling's current-year effective tax rate as a $150,000 cash tax savings that is a permanent book-tax difference.

Question

Quizplus · Accepted Answer

Temporary book-tax differences reverse over time and affect the timing of tax payments, but not the total amount of taxes paid. Permanent book-tax differences affect the total amount of taxes paid and do not reverse over time, thus impacting the effective tax rate differently.

Kling Corporation Reports a $150,000 Cash Tax Savings from a Temporary