Problem 13-2 Calculating the amount of temporary and permanent differences and tax entry (LO 13-2, LO 13-4, LO 13-8)

The following information pertains to Ramesh Company for the current year:

Book income before income taxes	$	106,000
Income tax expense		45,500
Income taxes due for this year		28,000
Statutory income tax rate		35	%

The company has one permanent difference and one temporary difference between book and taxable income.

Required:

Calculate the amount of temporary difference for the year and indicate whether it causes book income to be more or less than taxable income.

Calculate the amount of permanent difference for the year and indicate whether it causes book income to be more or less than taxable income.

Provide the journal entry to record income tax expense for the year.

Compute the effective tax rate (that is, income tax expense divided by book income before taxes).

Requirement 1 & 2

1. Calculate the amount of temporary difference for the year and indicate whether it causes book income to be more or less than taxable income.

2. Calculate the amount of permanent difference for the year and indicate whether it causes book income to be more or less than taxable income.

1.	Temporary difference arising during the year
	Is book income more or less than taxable income as a result?
2.	Permanent difference arising during the year
	Is book income more or less than taxable income as a result?

Requirement 3

Prepare the entry to record income taxes for the year.

Requirement 4

Effective tax rate

%