Reference no: EM132856754

For the year ended December 31, 2020, Laris Ltd. reported income before income taxes of $200,000. Prior to 2020 taxable income and accounting income was the same each year.

• In 2020, Laris Ltd. paid $120,000 for advertising; of this amount, $40,000 was expensed in 2020. The remaining $80,000 was treated as a prepaid expense for accounting purposes and would be expensed equally over the 2021-2022 period. The full $120,000was deductible for tax purposes in 2020.
• The company paid $30,000 in 2020 for membership in a local golf club (which was not deductible for tax purposes).
• In 2020 Laris Ltd. began offering a 1-year warranty on all merchandise sold. Warranty expenses for 2020 were $25,000, of which $20,000 was actual repairs for 2020 and the remaining $5,000 was estimated repairs to be completed in 2021.
• Meal and entertainment expenses totalled $40,000 in 2020, only half of which were deductible for income tax purposes.
• Depreciation expense for 2020 was $100,000. Capital Cost Allowance (CCA) claimed for the year was $130,000. Depreciation and CCA relate to an asset that was purchased on January 1, 2020 for $500,000.
• Laris was subject to a 25% income tax rate for 2020. Laris follows IFRS.

Problem 1: Calculate taxable income and taxes payable for 2020.