Reference no: EM132918308

Question - You are preparing the tax section of your company's financial statements. During the year 2020, your company acquired equipment that cost $1.8 million. The beginning balance shows a deferred tax asset of $6,000 related to equipment. The equipment is being depreciated over nine years for financial reporting purposes and is a Class 8 - 20% for tax purposes with half in year of acquisition. Depreciation expense was $200,000 for accounting purposes for 2020. Income before tax for 2021 was $275,000. Your company follows the ASPE future/deferred income taxes method.

The following items caused the only differences between accounting income before income tax and taxable income in 2021.

-Meals and entertainment expenses (only 50% deductible for tax) were $22,000 for 2021.

-The company paid your annual golf membership of $6,800.

-Dividends received from non-taxable Canadian corporations were $8,500

-In 2021, the company paid rent of $150,000. $50,000 related to 2021, and $50,000 relates to each of 2022 and 2023. Rent is deductible when paid for tax purposes.

-The company accrued warranty expenses of $25,000. Cash payments related to warranties were $11,150.

-Depreciation expense was $200,000 and CCA was $324,000 for 2021. There were no additions or disposals during the year. Income tax rates have not changed over the past five years.

-Calculate the balance in the Deferred Tax Asset or Liability account at December 31, 2021.

-Calculate income tax payable for 2021.

-Prepare the journal entries to record income taxes for 2021.

-Prepare the income tax expense section of the income statement for 2021, beginning with the line "Income before income tax."

-Indicate how deferred taxes should be presented on the December 31, 2021 balance sheet.

-How would your response for parts a to e change if your company reported under IFRS?