For book purposes, RadioAircast Incorporated reported $15,000 of income from municipal bonds. It also expensed $12,000 of radio station filing fines paid to the Federal Communications Commission the same year. What is the total book–tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?
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The total book-tax difference associated with these items is $15,000 (income from municipal bonds) - $12,000 (radio station filing fines) = $3,000.
This book-tax difference is considered favorable since the company reported more income for tax purposes than for book purposes.
Of the total adjustment, $12,000 (radio station filing fines) is considered permanent because it is a non-deductible expense for tax purposes. The remaining $3,000 (income from municipal bonds) is considered temporary because it will be included in taxable income in future years.
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