Deriving permanent and temporary differences from financial statement disclosures.

Beneish Company reports the following information for a year:

The company has both permanent and temporary differences between book income and taxable income. The permanent difference relates to goodwill, and the temporary difference relates to depreciation.

a. What is the ainount of temporary differences for the year? Give the amount, and indicate whether the effect is to make book income larger or smaller than ta.xable income.

b. What is the amount of permanent differences for the year? Give the amount, and indicate whether the effect is to make book income larger or smaller than taxable income.

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Book Income before Income Taxes Income Tax Expense Income Taxes Payable for This Year Income Tax Rate on Taxable Income $159,000 78,000 24,000 40 percent