Monro Inc. uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year. $\begin{array}{ll}
\text { Beginning allowance for bad debts } & \$ 61,150 \
\text { Actual write-offs of accounts receivable during the year } & (80,000) \
\text { Addition to allowance } & 88,500 \
\text { Ending allowance for bad debts } & \$ 69,650
\end{array}$
Because of the difference between the GAAP and the tax rules for accounting for bad debts, Monro Inc. has an:

Question

Monro Inc. uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year. $\begin{array}{ll}
\text { Beginning allowance for bad debts } & \$ 61,150 \
\text { Actual write-offs of accounts receivable during the year } & (80,000) \
\text { Addition to allowance } & 88,500 \
\text { Ending allowance for bad debts } & \$ 69,650
\end{array}$
 Because of the difference between the GAAP and the tax rules for accounting for bad debts, Monro Inc. has an:

Quizplus · Accepted Answer

The reconciliation of Monro's allowance for bad debts suggests that the book (GAAP) amount is higher than the tax amount by $8,500. This difference is likely to be a temporary timing difference, as it is due to the different rules for recognizing bad debt expenses for book and tax purposes. Therefore, the correct answer is C, which describes a temporary excess of taxable income over book income.

Monro Inc Uses the Accrual Method of Accounting Because of the Difference Between the GAAP and the Tax