What book-tax difference associated with its inventory

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Problem - Assume Maple Corp. has just completed the third year of its existence (year 3). The table below indicates Maple's ending book inventory for each year and the additional §263A costs it was required to include in its ending inventory. Maple immediately expensed these costs for book purposes. In year 2, Maple sold all of its year 1 ending inventory, and in year 3 it sold all of its year 2 ending inventory.

 

Year 1

Year 2

Year 3

Ending book inventory

$2,600,000

$2,920,000

$2,166,000

Additional §263A costs

43,000

88,750

40,750

Ending tax inventory

$2,643,000

$3,008,750

$2,206,750

Required -

a. What book-tax difference associated with its inventory did Maple report in year 1? Was the difference favorable or unfavorable? Was it permanent or temporary?

b. What book-tax difference associated with its inventory did Maple report in year 2? Was the difference favorable or unfavorable? Was it permanent or temporary?

c. What book-tax difference associated with its inventory did Maple report in year 3? Was the difference favorable or unfavorable? Was it permanent or temporary?

Reference no: EM132649006

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