The following information pertains to Ramesh Company for the current year:
The company has one permanent difference and one temporary difference between book and taxable income.
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). Explain why this rate is different from the statutory tax rate of 40%.
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