A is corrent. Temporary differences are differences between taxable income and accounting income which originate in one period and reverse in one or more subsequent periods. Interest received on municipal bonds ($10,000) and penalties and related interest ($18,000) are examples of permanent differences. Permanent differences are items that either enter into pretax accounting income but never into taxable income (such as these two items) or enter into taxable income but never into pretax accounting income.
B is incorrect. Temporary differences are differences between taxable income and accounting income which originate in one period and reverse in one or more subsequent periods. Interest received on municipal bonds ($10,000) and penalties and related interest ($18,000) are examples of permanent differences. Permanent differences are items that either enter into pretax accounting income but never into taxable income (such as these two items) or enter into taxable income but never into pretax accounting income.
B is incorrect. Temporary differences are differences between taxable income and accounting income which originate in one period and reverse in one or more subsequent periods. Interest received on municipal bonds ($10,000) and penalties and related interest ($18,000) are examples of permanent differences. Permanent differences are items that either enter into pretax accounting income but never into taxable income (such as these two items) or enter into taxable income but never into pretax accounting income.
D is incorrect. Temporary differences are differences between taxable income and accounting income which originate in one period and reverse in one or more subsequent periods. Interest received on municipal bonds ($10,000) and penalties and related interest ($18,000) are examples of permanent differences. Permanent differences are items that either enter into pretax accounting income but never into taxable income (such as these two items) or enter into taxable income but never into pretax accounting income.
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