Which of the following items represents a temporary book-tax difference?
A) Municipal bond interest.
B) Federal income tax paid.
C) Addition to bad debt allowance.
D) Nondeductible penalties.

Question

Quizplus · Accepted Answer

Temporary book-tax differences are differences between the book income and taxable income that will reverse over time. An addition to the bad debt allowance is a temporary difference because it affects book income when the allowance is made but affects taxable income when the actual bad debts occur.

Which of the Following Items Represents a Temporary Book-Tax Difference