Reference no: EM132893980

Problem - Bramble Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in June 2020. Bramble uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Bramble uses the completed-contract method allowed by the CRA. By its first fiscal year end, the accounts related to the contract had the following balances:

Accounts Receivable $322,000

Contract Asset/Liability (net of billings to date of $416,000) 104,000

Revenue from Long-Term Contracts 520,000

Construction Expenses 364,000

The accounts related to the equipment that Bramble purchased to construct the road had the following balances at the end of the first fiscal year ended December 31, 2020 for accounting and tax purposes:

Equipment $1,180,000

Accumulated Depreciation-Equipment 182,000

Undepreciated Capital Cost 1,049,000

Bramble's tax rate is 25% for 2020 and subsequent years. Income before income tax for the year ended December 31, 2020, was $188,000. Bramble reports under IFRS.

Required -

1. Calculate the deferred tax asset or liability balances at December 31, 2020.

2. Calculate taxable income and income tax payable for 2020.

3. Prepare the journal entries to record income taxes for 2020.

4. Provide the SFP presentation for any resulting deferred tax balance sheet accounts at December 31, 2020.