Jaboy Inc. was incorporated three years ago. In its first year, Jaboy capitalized $72,000 organizational and start-up costs for tax purposes. However, it expensed these costs for financial statement purposes. Which of the following statements is true?
A) As a result of the accounting difference three years ago, Jaboy has a $4,800 favorable book/tax difference in the current year.
B) As a result of the accounting difference three years ago, Jaboy has a $4,800 unfavorable book/tax difference in the current year.
C) The accounting difference three years ago has no book/tax consequence in the current year.
D) None of these choices are true.

Question

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The Answer of Jaboy Inc. was incorporated three years ago. In its first year, Jaboy capitalized $72,000 organizational and start-up costs for tax purposes. However, it expensed these costs for financial statement purposes. Which of the following statements is true?
A) As a result of the accounting difference three years ago, Jaboy has a $4,800 favorable book/tax difference in the current year.
B) As a result of the accounting difference three years ago, Jaboy has a $4,800 unfavorable book/tax difference in the current year.
C) The accounting difference three years ago has no book/tax consequence in the current year.
D) None of these choices are true.

Jaboy Inc Was Incorporated Three Years Ago