1. Assume the following facts for RTY Corporation for Year 1.

• RTY recorded $2,300,000 of book income.
• At the end of the year, RTY had accumulated depreciation for book purposes of $100,000 and accumulated depreciation for tax purposes of $150,000. As of the beginning of the year, the accumulated book and tax depreciation balances were $80,000 and $120,000,
• RTY paid premiums for officer life insurance of $50,000
• RTY established a warranty reserve of $15,000
• RTYs reserve for obsolete inventory decreased from $37,500 to $19,500
• Assume a statutory income tax rate of 25 percent

1. What are RTY's permanent items?
2. What are RTY's changes in temporary differences?

My question: Is obsolete inventory considered permanent item? Also, do you need to add it back $18,000 ($37,500-$19,500) since it decreased? TY!