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Suppose you know a company has taxable income of $279, DTL of 21, and a permanent difference of 10. The permanent difference13

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Answer #1

Answer

· Requirement asked

A

Taxable Income

$279

B = $ 21/20%

Temporary differences leading to creation of DTL

$105

C

Permanent difference [municipal interest]

$10

D = A+B+C

Pretax financial Income

$394

Answer

>Municipal bond interest is a revenue item that would have been deducted as permanent difference for calculating taxable income. Hence the same is added.
>DTL are created when temporary difference exist that decrease the taxable income in the current year. Hence the same is added to get the pretax income.

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