TB MC Qu$.14-86$ Everwood Co$.$ had net...

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

A net operating loss carryback.

Premlums pald on life insurance on key executives where the company is the beneficiary.

Accrued warranty expenses not yet deductible on the tax return.