1. Joe Thornton, who lives in California, travels to Iowa to purchase a hockey stick for $10,000. California has a 7.50% sales and use tax. Iowa's sales and use tax is 6%.

Compute the use tax Mr. Thornton owes to California.

a. $0

b. $600

c. $150

d. $750

2. Monro Incorporated uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year.

Beginning allowance for bad debts	$ 61,150
Actual write-offs of accounts receivable during the year	(80,000)
Addition to allowance	88,500
Ending allowance for bad debts	$ 69,650

Because of the difference between the GAAP and the tax rules for accounting for bad debts, Monro Incorporated has an:

a. $8,500 temporary excess of taxable income over book income.

b. $8,500 permanent excess of taxable income over book income.

c. $8,500 temporary excess of book income over taxable income.

d. $8,500 permanent excess of book income over taxable income.