Reference no: EM132834267

DBT Inc.'s controller, has asked for help in determining the current and deferred tax position of the company at December 31, 2021. The controller has provided you with the following information:

1. Net income for accounting purposes before taxes was $ 950,000 for the year ended December 31, 2021.

2. Prior to 2020 accounting income and taxable income were identical.

3. The company needs help determining the balance in Deferred Tax Asset/Liability account at December 31, 2020.

4. Warranty expense for 2021 was $70,000. The actual amount paid to service warranties was $50,000. The balance in the accrued warranty liability account at December 31, 2020 was $30,000.

5. DBT purchased Class 10 (30% CCA) equipment on January 1, 2020 for $1,000,000 with a useful life of ten years. This equipment qualified for the Accelerated Investment Incentive (AII).

6. In 2021 the company received Canadian dividends which were recorded as revenue for accounting purposes of $20,000. This amount was not taxable.

7. In 2021 the company recorded meals and entertainment expenses of $100,000.

8. At the end of 2020 the company had a loss carryforward of $140,000. It was more likely than not that the company would not be able to benefit from this loss.

9. The tax rate for 2020 was 40%; for 2021, it was 42%. These rates were announced in each respective year and were not known in advance.

10. Assume that DBT Inc. follows IFRS.

Hint: Don't forget to include the 2020 Deferred Tax Asset/Liability account balances when calculating your 2021 deferred tax journal entries.

Required:

Problem a) Determine the entries necessary to record current and deferred income taxes for the 2021 year including any recoverable amounts. Complete the DTA/DTL schedule for full marks.

Problem b) Explain how the deferred income tax asset/liability would be presented on the classified statement of financial position under IFRS.