Which of the following is not a permanent difference when reconciling accounting income to taxable income...

Which of the following is not a permanent difference when reconciling accounting income to taxable income in order to compute income tax expense?

Select one:

a. Fines

b. Dividends received from a Canadian company

c. Penalties

d. One half of a taxable capital gain

e. None of the above

Expert Solution

A permanent difference is an accounting transaction that the company reports for book purposes but that it can’t report for tax purposes.

a. Fines & C. Penalties-

These expenses occur when a business breaks civil, criminal, or statutory law. The company deducts any fines assessed against book income, but income tax disallows a penalty/fine expense for tax purposes. The company doesn't get to reduce taxable income for the expense. Thus a permanent difference occurs between net and taxable income. Hence fines and penalties are permanent differences.

b. Dividend received from canadian corporation

Dividend received from another corporation are usually not taxable but are included in book income. This gives rise to permanent difference.

d. One half of taxable capital gain

capital gain are included fully in book income. however only half of capital gain is included in taxable income. Hence the book income and taxable income would never reconcile. It is a permanent difference.

The correct answer is none of the above (e) since all the options are permanent differences.

ekkarill92 answered 2 years ago

Which of the following is not considered a timing difference due to separate accounting methods for taxable income and E&P?

Which of the following is not considered a timing difference due to separate accounting methods for taxable income and E&P?A) Dividends received deductionB) Installment gain recognized in current year related to a sale in prior yearC) Gain on $500,000 taxable income sale of depreciable assets with higher E&P basisD) Section 179 expense

When accounting for income taxes, the differences between financial accounting and taxation accounting creates permanent and...

When accounting for income taxes, the differences between financial accounting and taxation accounting creates permanent and temporary differences between the expenses and liabilities reported under each regime. Why do these differences exist? What are the reasons that explain why we have one system of accounting for financial reporting, and a second for taxation? Please give an in-depth explanation for the various reasons for why there are two systems for this, instead of one.

During the semester we learned the importance of reconciling from book income to taxable income, and...

During the semester we learned the importance of reconciling from book income to taxable income, and the important of understanding the debits and credits, especially as we are accountants! I would like you to show how you understand to do the calculations by explaining to me the following: 1. Please identify whether the item is a debit or credit for financial statement purposes (debit or credit)= 2. Whether the tax treatment is the same as for book purposes- yes or...

Which of the following business expenses always results in a difference between taxable income and book...

Which of the following business expenses always results in a difference between taxable income and book income? A. Rent expense B. Interest expense C. Life insurance premiums D. Salary expense

9. Which of the following business expenses always results in a difference between taxable income and...

9. Which of the following business expenses always results in a difference between taxable income and book income? A. Rent expense B. Interest expense C. Life insurance premiums D. Salary expense

Converting Book Income to Taxable Income. The following income and expense accounts appeared in the accounting...

Converting Book Income to Taxable Income. The following income and expense accounts appeared in the accounting records of Rocket Corporation, an accrual basis taxpayer, for the current calendar year. Book Income These are all Credits Net Sales $3,230,000 Dividends 10,000 (1) Interest 18,000 (2) Gain on Sale of stock 9,000 (3) Key-person life insurance proceeds 100,000 These are all debits Cost of goods sold $2,000,000 Salaries and wages $500,000 Bad Debts 13,000 (4) Payroll Taxes 62,000 Interest Expense 12,000 (5)...

what is the difference between a temporary and a permanent difference, with regards to income tax...

what is the difference between a temporary and a permanent difference, with regards to income tax reporting? Please provide an example of each of these in your response. Thank you

a> assuming the Walmart had no significant permanent differences between book income and taxable income, did...

a> assuming the Walmart had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for the year ending January 31, 2016(hereafter, fiscal 2015)? explain b>assuming all current taxes are paid in cash, will the adjustment to net income for deferred taxes to compute cash flow from operations tin the statement of cash flows result in an addition or subtraction for fiscal 2015? c>walmart reports deferred...

Supreme Corporation reports pretax accounting income of $600,000, but due to a single temporary difference, taxable...

Supreme Corporation reports pretax accounting income of $600,000, but due to a single temporary difference, taxable income is only $500,000. At beginning of the year, no temporary differences existed. Assuming a tax rate of 40%, the amount of deferred tax liability or deferred tax asset to be reported this year would be: a. Deferred tax asset of $40,000 b. Deferred tax liability of $40,000 c. Deferred tax asset of $60,000 d. Deferred tax liability of $60,000

Which of the following is not considered a permanent difference? a. Interest received on municipal bonds....

Which of the following is not considered a permanent difference? a. Interest received on municipal bonds. b. Stock-based compensation expense. c. Fines resulting from violating the law. d. Premiums paid for life insurance on a company's CEO when the company is the beneficiary.

Question