ACCOUNTING 545

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:

  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.
  3. Provide the journal entry to record income tax expense for the year.
  4. Compute the effective tax rate (that is, income tax expense divided by book income before taxes).

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.

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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?

  • Prepare the entry to record income taxes for the year.

Note: Enter debits before credits.

3.

Provide the journal entry to record income tax expense for the year. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)

 
Transaction General Journal Debit Credit 1

4.

Compute the effective tax rate (that is, income tax expense divided by book income before taxes). (Round your answer to 1 decimal places.)

 
Effective tax rate %
 
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