Reference no: EM132693498
The following tax information is associated with Sam Corp.'s December 31, 20X6, fiscal year:
- Sam's accounting income before taxes was $1,400,000.
- Sam paid for golf memberships for several of its salespeople, senior managers, and executives. The total fees, dues and other costs related to golf memberships totalled $42,300. The salespeople frequently golf with customers, particularly their corporate customers who are frequent buyers.
- Meals and entertainment expenses totalled $72,400.
- When the payroll manager was on holidays, the payroll source deductions were remitted one week late. The Canada Revenue Agency charged penalties and interest of $3,000.
- Sam held shares in the Rocky Mountain Western Bank, a taxable Canadian corporation. During 20X6, Sam received $4,500 in dividends.
- Total warranty costs paid by Sam during 20X6 were $27,300. Warranty expense for the year was $32,500.
- Depreciation expense for the year totalled $565,000. CCA claimed was $685,000.
- Pension expense for the year was $52,000. Sam remitted $34,000 to the pension trustee during the year.
The accounting and taxation base of Sam's select assets and liabilities as at December 31, 20X5 follows:
Statement of financial position item
Property, plant, and equipment
Accounting base $4,500,000
Taxation base $3,800,000
Warranty liability
Accounting base $130,000
Taxation base $0
Defined benefit pension plan liability
Accounting base $420,000
Taxation base $0
- Sam's income tax rate for 20X5 and 20X6 is 27%. On December 15, 20X6, the government enacted legislation that decreased the corporate tax rate to 25% on January 1, 20X7 Income tax instalments made during Quarters 1, 2, and 3 in the 20X6 fiscal year totalled $225,000. The instalments were debited to an 'Income Tax Instalment' account.
Required:
Problem a) Prepare the schedule that reconciles Sam's accounting income before taxes to its taxable income for its year ended December 31, 20X6.
Problem b) Prepare the worksheet to calculate Sam's deferred income tax expense for its year ended December 31, 20X6.
Problem c) Prepare Sam's journal entries to record tax expense for its year ended December 31, 20X6.