Question:XYZ Company reports book income of $720,000 for Year 1, which includes a Warranty Expense of $80,000. For tax purposes, warranty costs are not deductible until incurred. Actual expenditures for warranty costs during Year 1 totaled $48,000. The tax rate for Year 1 is 30 percent.

Given the above information, how did book and tax income relate in Year 1? 

A Book income exceeded taxable income. 
B Taxable income exceeded book income. 
C Book income equaled taxable income. 
D The difference between book income and taxable income is due to a permanent difference. 

+ Answer
D 

+ Explanation
Answer not sure

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Md. Habib Ullah

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