Reference no: EM133090969

Question - The following information relates to Sheeren Corporation's transactions during 2020, its first year of operations.

1. Income before income tax on the income statement for 2020 was $60,000.

2. Income before income tax ($60,000 above) is net of a loss due to the write-down of land of $46,000.

3. The tax rate enacted for 2020 and future years is 25%. Because this was Sheeren Corporation's first taxation year, no instalments on account of income taxes were required or paid by Sheeren.

4. Differences between the 2020 GAAP amounts and their treatment for tax purposes were as follows:

5. Warranty expense accrued for financial reporting purposes amounted to $12,000. Warranty payments deducted for taxes amounted to $15,000. Warranty liabilities were classified as current on the SFP.

6. Of the loss on writedown of land of $46,000, 25% will never be tax-deductible. The remaining 75% will be deductible for tax purposes evenly over the years from 2021 to 2023. The loss relates to the loss in value of company land due to contamination.

7. Depreciation of property, plant, and equipment for financial reporting purposes amounted to $80,000. CCA charged on the tax return amounted to $60,000. The related property, plant, and equipment cost $300,000 when it was acquired early in 2020.

8. A $3,500 fine paid for a violation of pollution laws was deducted in calculating accounting income.

9. Dividend revenue earned on an investment was tax exempt and amounted to $1,400.

10. Taxable income is expected for the next few years.

Sheeren Corporation follows IFRS.

Required -

1. Calculate Sheeren Corporation's deferred tax asset or liability at December 31, 2020.

2. Calculate the taxable income for 2020. Show all details of the adjustments to accounting income to arrive at taxable income.

3. Prepare the journal entry(ies) to record deferred income taxes for 2020.

4. Prepare a partial 2020 income statement, beginning with "Income before income tax."