Reference no: EM133029597
Question - Bridgeport Corporation applies IFRS. Information about Bridgeport Corporation's income before income tax of $649,000 for its year ended December 31, 2020 includes the following:
1. CCA reported on the 2020 tax return exceeded depreciation reported on the income statement by $97,000. This difference, plus the $162,000 accumulated taxable temporary difference at January 1, 2020, is expected to reverse in equal amounts over the four-year period from 2021 to 2024.
2. Dividends received from taxable Canadian corporations were $17,000.
3. Rent collected in advance and included in taxable income as at December 31, 2019 totalled $60,000 for a three-year period. Of this amount, $40,000 was reported as unearned for book purposes at December 31, 2020. Bridgeport reports unearned revenue as a current liability if it will be recognized in income within 12 months from the balance sheet date. Bridgeport paid a $2,700 interest penalty for late income tax instalments. The interest penalty is not deductible for income tax purposes at any time.
4. Equipment was disposed of during the year for $93,000. The equipment had a cost of $99,000 and accumulated depreciation to the date of disposal of $41,000. The total proceeds on the sale of these assets reduced the CCA class; in other words, no gain or loss is reported for tax purposes.
5. Bridgeport recognized a $72,000 loss on impairment of a long-term investment whose value was considered impaired. The Income Tax Act permits the loss to be deducted only when the investment is sold and the loss is actually realized. The investment was accounted for at amortized cost.
6. The tax rates are 30% for 2020 and 25% for 2021 and subsequent years. These rates have been enacted and known for the past two years.
Required -
(a) Prepare the journal entry to record income taxes for 2020.
(b) Indicate how the Deferred Tax Asset or Deferred Tax Liability account(s) will be reported on the comparative statements of financial position for 2019 and 2020.
(c) Prepare the income tax expense section of the income statement for 2020, beginning with "Income before income tax."
(d) Calculate the effective rate of tax and Indicate how the Deferred Tax Asset or Liability account(s) will be reported on the comparative statements of financial position for 2019 and 2020 if Bridgeport reported under ASPE.