Reference no: EM132504613
Question - In 2020, MarigoldLtd., which follows IFRS, reported accounting income of $324,000 and the 2020 tax rate was 18%. Marigoldhad two timing differences for tax purposes:
CCA on the company's tax return was $357,400. Depreciation expense on the financial statements was $230,000.
Accrued warranty expense for financial statement purposes was $83,200(accrued expenses are not deductible for tax purposes). This is the first yearMarigoldoffers warranties.
Both of these timing differences will fully reverse over the next four years, as follows:
|
Year
|
Depreciation Difference
|
Warranty Expense
|
Rate
|
|
2021
|
$42,600
|
$10,200
|
17%
|
|
2022
|
36,700
|
15,100
|
17%
|
|
2023
|
26,100
|
25,800
|
15%
|
|
2024
|
22,000
|
32,100
|
15%
|
|
Total
|
$127,400
|
$83,200
|
|
Required -
1. Calculate income taxes payable for 2020.
2. Prepare the journal entries to record income taxes for 2020.
3. In 2021 the government announced a further tax rate reduction will be effective for the 2024 taxation year. The new rate will be 13%. Prepare the journal entry to adjust deferred taxes for the reduced rate.
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