Signo Inc.'s current year income statement includes a $21,000 gain realized on the exchange of an old business asset for a new business asset. If the exchange is nontaxable, Signo has a $21,000 favorable permanent book/tax difference.

Question

Quizplus · Accepted Answer

The $21,000 gain is a temporary difference, not a permanent one, because it will affect taxable income in the future when the new asset is depreciated or disposed of, not creating a permanent difference between book and tax income.

Signo Inc'S Current Year Income Statement Includes a $21,000 Gain Realized