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Prepare the reconciliation of actual tax rate

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Reference no: EM133079575

Question - The records for HUMBER Inc. show the following data for calendar 2020:

1. Pre-tax accounting income is $175,000. The enacted income tax rate is 28%.

2. The gross profit on construction contract calculated using percentage of completion recorded on the books was $100,000. No contracts were completed in 2020 and so the gross profit for tax purposes was $0.

3. Interest paid on late and deficient tax instalments was $3,000.

4. Equipment was acquired in January 2020 for $300,000. HUMBER uses straight-line depreciation over a ten-year life (no residual value). For tax purposes, HUMBER uses CCA at 30% for 2020.

5. HUMBER held FV-NI investments on which $1,500 unrealized losses were recorded at the end of 2020.

Required -

a) Prepare a schedule (starting with pre-tax accounting income) to calculate taxable income.

b) Prepare the required adjusting journal entries to record income taxes for 2020.

c) Prepare the reconciliation of actual tax rate to the statutory rate as required for inclusion in the financial statement note on income taxes. Round tax rates to one decimal place.

Reference no: EM133079575

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