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

The company has both a permanent and a temporary difference between book and taxable income.
The permanent difference relates to goodwill (that is, assume that amortization of goodwill is not allowed as an expense for tax purposes), and the temporary difference relates to depreciation expense.
Required:
1. Calculate the amount of temporary difference for the year and indicate whether it causes the book income to be more or less than the taxable income.
2. Calculate the amount of permanent difference for the year and indicate whether it causes the book income to be more or less than the taxable income.
3. Provide the journal entry to record the income tax expense for the year.
4. Compute the effective tax rate (that is, income tax expense divided by book income before taxes). Explain why this rate is different from the statutory tax rate of 40%.

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Book income before income taxes. Income tax expense $106,000 52,000 Income taxes payable for this year 32,000 Statutory income tax rate 40%