a. Porter Incorporated reported a $20,000 expense on its current year financial statements. Only $13,400 of this amount was deductible on Porter's current year tax return. Which of the following is true?

a. If this transaction resulted in a temporary book/tax difference, it had no effect on Porter's deferred tax accounts.

b. If this transaction resulted in a permanent book/tax difference, it had no effect on the computation of Porter's tax expense per books.

c. This transaction resulted in a $6,600 unfavorable difference between book income and taxable income.

d. This transaction resulted in a $6,600 favorable difference between book income and taxable income.

2. After auditing Jayne Morgans 2019 Form 1040, the IRS assessed a $19,900 deficiency of income tax. Jaynes return reported $218,000 tax, her correct 2019 income tax was $237,900 ($19,900 deficiency + $218,000 reported tax). Compute Jaynes penalty for a substantial understatement of income tax.

a. $2,980

b. $3,980

c. $5,000

d. $0