Deriving permanent and temporary differences from financial statement disclosures.

Pownall Company reports the following information for a year:

Book Income before Income Taxes $318,000 Income Tax Expense 156,000 Income Taxes Payable for This Year 48,000 Income Tax Rate on Taxable Income 40 percent The company has both permanent and temporary differences between book income and taxable income.

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

X EXERCISES