Monro IncUses the Accrual Method of Accounting

question 69

Multiple Choice

Monro Inc.uses the accrual method of accounting.Here is a reconciliation of Monro's allowance for bad debts for the current year. Because of the difference between the GAAP and the tax rules for accounting for bad debts,Monro Inc.has an:

• A)$8,500 permanent excess of book income over taxable income.
• B)$8,500 permanent excess of taxable income over book income.
• C)$8,500 temporary excess of taxable income over book income.
• D)$8,500 temporary excess of book income over taxable income.

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Definitions:

Strike Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Hedge Ratio

The ratio of the size of a position in a hedging instrument to the size of the exposure it seeks to hedge.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period.

Put Option

This contract permits a person to have the option, without being compelled, to sell a certain amount of a base asset at a fixed price within a designated timeframe.