Income Tax Accounting Methods and Financial Accounting Methods Differ in Many

Multiple Choice

Income tax accounting methods and financial accounting methods differ in many ways. Which of the following tax law provisions are likely to create permanent differences between taxable income and financial (or book) income of a single entity?
I.Treatment of payment of penalties and fines.
II.Disallowance of 50% of the cost of business meals and 100% of entertainment.
​

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.