Homework Answers
Answer - (a) -
Classification of items
| No. | Item | Category |
| 1. | Increase in book allowance for anticipated warranty costs | Temporary difference |
| 2. | Interest income from City of Westerville bonds | Permanent difference |
| 3. | Bribes paid to Federal inspectors | Permanent difference |
.
Answer - (b) -
Computation of Rubio's Taxable Income
| Particulars | Explanation | Amount ($) |
| Book income including identified items | Given in question | 195000 |
| Less: Interest income from City of Westerville bonds | Given in question | (19500) |
| Add: Bribes paid to Federal inspectors | Given in question | 39000 |
| Add: Increase in book allowance for anticipated warranty costs | Given in question | 9750 |
| Rubio's Taxable Income | $195000 - $19500 + $39000 + $9750 | 224250 |
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