QUESTION 20 Which of the following causes a permanent difference between taxable

Question

QUESTION 20 Which of the following causes a permanent difference between taxable income and pretax accounting income? O The installment method used for sales of property O MACRS depreciation method used for equipment O Interest income on municipal bonds QUESTION 21 For reporting purposes, current deferred tax assets and current defered tax liabilities for the same company and tax jurisdiction are O Netted against one another and shown as a net current asset or liability in the balance sheet O Reported separately in the balance sheet O Reflected only in the notes to the fnancial statements O Combined with noncurrent deferred tax assets and noncurrent deferred tax Babilities in the balance sheet to show a single net noncurrent amount QUESTION 22 Depreclation in excess of financial statement asount Taxable income (tax return) The Inventory impairments r elate to Chan's Columbian tax return. The depreciation relates to Chan's U S. tax return. What amounts) should Chan report related to deferred income taxes in ts 2018 balance she OCurrent deforred tax asset of $16,000 and noncurrent deferred tax liability of $48,000 O Noncurrent deferred tax Sability of $32.000 O Noncurrent deferred tax asset of $16,000 and noncurent deferred tax liabilty of $48,000 O Noncurrent deferred tax asset of $32000 D e

Explanation / Answer

Answer 20: Third option i.e. Interest income on municipal bonds.

Explanation:

Inerest income on municipal bonds are exempt from tax therefore, it causes a permanent difference between taxable income and pretax accounting income. The other three differences are temporary in nature.

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