Item$31$

Time Remaining $2$ hours $9$ minutes $21$ seconds

$02$:$09$:$21$

Item $31$

Time Remaining $2$ hours $9$ minutes $21$ seconds

$02$:$09$:$21$

Everwood Co$.$ had net income of $$1,000,000$ for the year ending December $31,20$X$1,$ its first year of operations. During this time period, Everwood also had a permanent tax difference of $$120,000$ and its adjusted pre$-$tax book income is $$1,220,000.$ Analysts have approximated Everwood$$s taxable income at $$735,000$ for the year ending December $31,20$X$1.$ Which of the following most likely caused the difference between Everwood$$s book and tax income?

Multiple Choice

Purchases of long$-$lived capital assets.

Accrued warranty expenses not yet deductible on the tax return.

Premiums paid on life insurance on key executives where the company is the beneficiary.

A net operating loss carryback.