Reference no: EM132566551

SweetCorporation has provided the following information for the year ended December 31, 2020.

Sweet Corporation

Income Statement

For the Year Ended December 31, 2020

Revenue

Service Revenue 107,500

Dividend Revenue 8,900 $116,400

Operating Expenses

Supplies Expense 2,000

Depreciation Expense 19,700

Advertising Expense 900

Meals and Entertainment Expense6,100

Rent Expense 9,200

Litigation Expense 8,400

Salaries and Wages Expense40,800

Warranty Expense 3,800 90,900

Operating Income before income tax $25,500

Additional Information:

1. Sweet is privately owned, and uses ASPE. The dividend revenue represents dividends received from taxable Canadian corporations.

2. Sweet's income tax rate is 30%.3.On January 1, 2020, Sweet had a future tax liability of $2,955 related to its property, plant, and equipment (PPE).4.During the year warranty expense of $3,800 was accrued. One half of this amount was paid during 2020. This is the first year Sweet offers warranties on services rendered.

3. Property, plant, and equipment was purchased for $98,500 on January 1, 2019. These assets are being depreciated on a straight-line basis over five years with no residual value and have a 20% CCA rate. This PPE is considered "eligible equipment" for purposes of the Accelerated Investment Incentive (the "AII") (under the AII, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate).6.On July 1, Sweet was sued by a competitor. Although the lawsuit has not been finalized, management believes that it is likely that a settlement will be reached in the next year for $8,400.7.On November 30, $3,600 cash was paid in advance for four months of advertising, starting Dec. 1.

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

Question 2: Prepare the journal entries to record 2020 income taxes (current and future).

Question 3: Explain how the future tax amounts will be shown on the balance sheet.

Noncurrent Future Tax Liability$

Current Future Tax Asset$

explain with calculation.