1. A member of the board of directors is concerned that the companys income statement reports income tax expense of $12.3 million, but the income tax obligation to the government for the year is only $7.9 million. How might the corporate controller explain this difference? 

2. Temporary differences result in future taxable or deductible amounts when the related asset or liability is recovered or settled. Some differences, though, are not temporary. What events create permanent differences? What effect do these have on the determination of income taxes payable? Of deferred income taxes? Of tax expense?

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