General Question/Exercise 16-7 Identify Permanent versus Temporary Differences Identify in the following circumstances whether the difference is a permanent (P) or temporary (T) difference. MACRS depreciation is used for tax purposes but straight-line is used for financial reporting. Magazine subscriptions are taxable when received but recognized for financial reporting as the magazine is delivered. Interest expenses associated with obtaining a loan to invest in tax exempt securities. Warranty expense recorded for financial reporting when products are sold but recorded for tax when the repairs are made. Interest income received on tax-exempt municipal bonds. Sale of property recognized for tax on the installment basis but for financial reporting on the full accrual method. Accrual for financial reporting of a loss contingency associated with litigation, deductible for tax when paid. Fines incurred for violations of pollution ordinances. Prepaid insurance, tax deductible when paid. Proceeds from keyman life insurance policy Write-down of inventory to reflect the lower of cost or market rule for financial reporting, which is not tax deductible until sold for tax purposes