Question

Which of the following is an example of a permanent difference? a. Bad debt expense recognized for financial reporting, but only write-offs of bad debts are deductible for tax reporting b. Prepaid rent that is recognized as an asset for financial reporting but tax deductible when paid c. Depreciation recognized using straight-line for financial reporting but using an accelerated method for tax reporting

Answer 1

Answer:

d.

Explanation:

A permanent difference refers to a business transaction that is reported differently when dealing with financial or tax reporting purposes. Therefore based on the answers provided within the question it can be said that the answer is Interest income from municipal bond investments recognized for financial reporting, but not taxable for tax reporting. Since they are reported differently since they are not taxable.