The following information is from the financial statements of the Core Products Group for the first three years of its operations.

Required
a. Identify all book- tax differences and classify each difference as temporary or permanent.
b. Prepare the footnote, in percentages and dollars, to reconcile the company€™s federal tax rate to its effective (actual) tax rate for the three years presented.
c. Determine the net income reported on the income statement for each year.

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Year 1 Year 2 Year 3 GAAP Tax GAAP GAAP Tax Account Revenue from Product Sales Revenue from Subscriptions Cash collected on Subscriptions Installment Sales Taxable Portion on Installment Sales Collections Taxfree Interest Income ar $300,000 300,000 $380,000 $30,000 $525,000 $525,000 0 20,000 0 25,500 30,000 0 230,000 15,500 0 28,000 0 32,000 0 128,500 0 195,000 0 145,500 0 198,000 0 210,000 0 42,000 0 42,000 42,000 9602,000 $461,000 $570,500 $606,000 $787,500 S767,000 Total Revenues Year 1 Year 2 Year 3 Tax GAAP Tax Tax Account Cost of Sales EstimatedWarranty Expense Actual Repair Costs Operating Expenses Insuranoe Expense: Officers Life 20,000 Depreciation Expense GAAP GAAP S120,000 $180,000 $150,000 $195,000 $180,000 $75,000 60,000 0 62,000 0 0 80,000 98,000 0 20,000 0 120,000 80,000 80,000 40,000 140,000 170,000 170,000 0 20,000 0 20,000 90,000 90,000 90,000 45,000 S370,000 $415,000 $462.000 $505,000 S559,000 $410,000 90,000 135,000 Total Expenses Income before Tax Taxable Income Tax Rate Tax Payable $108,500 $229500 $ 46,000 $101,000 $357,000 40% х 40% × 40% $ 18,400 40,400 $142,800