Reference no: EM132705331

Question 1 - Marigold Inc. reports the following incomes (losses) for both book and tax purposes:

Year Accounting Income (Loss) Tax Rate

2020 218,000 30%

2021 95,000 32%

2022 (325,000)34%

2023 40,000 35%

Marigold Inc. follows IFRS and uses the carryback provision where possible. The tax rates listed were all enacted in 2020.

Prepare the journal entries for 2022. Assume also that i) it is probable that the company will generate sufficient taxable income in the future so that the benefit of any remaining loss will be realized; ii) company's future profitability is uncertain and there is not enough evidence concerning whether there will be future taxable income.

Question 2 - Current Attempt in Progress - Larkspur Enterprises Ltd., a private company following ASPE earned accounting income before taxes of $1,723,000 for the year ended December 31, 2020.

During 2020, Larkspur paid $219,000 for meals and entertainment expenses.

In 2017, Larkspur's tax accountant made a mistake when preparing the company's income tax return. In 2020, Larkspur paid $26,000 in penalties related to this error. These penalties were not deductible for tax purposes.

Larkspur owned a warehouse building for which it had no current use, so the company chose to use the building as a rental property. At the beginning of 2020, Larkspur rented the building to SPK Inc. for two years at $253,000 per year. SPK paid the entire two years' rent in advance.

Larkspur used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $396,000. For tax purposes, Larkspur claimed the maximum capital cost allowance of $621,000.

Larkspur began to sell its products with a two-year warranty against manufacturing defects in 2020 to match a warranty introduced by its main competitor. In 2020, Larkspur accrued $593,000 of warranty expenses: actual expenditures for 2020 were $282,000 with the remaining $311,000 anticipated in 2021.

In 2020, Larkspur was subject to a 35% income tax rate. During the year, the federal government announced that tax rates would be decreased to 33% for all future years beginning January 1, 2021.

Prepare the journal entries to record current and future income taxes for 2020.

Question 3 - At December 31, 2019, Monty Corporation had a deferred tax asset of $787,500, resulting from future deductible amounts of $3.15 million and an enacted tax rate of 25%. In May 2020, new income tax legislation is signed into law that raises the tax rate to 30% for 2020 and future years.?

Prepare the journal entry for Monty to adjust the deferred tax account.