what is the amount of permanent differences for the year indicate whether the effect 600812

Calculating temporary and permanent differences

Hernan Company reports the following information for the year:

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Book income before income taxes

€636,000

Income tax expense

€312,000

Income taxes payable for the year

€96,000

Income tax rate on taxable income

40%

The company has both permanent and temporary differences between book income and taxable income.

Required

(a) What is the amount of temporary differences for the year? 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? Indicate whether the effect is to make book income larger or smaller than taxable income.

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