Reference no: EM132492612
Question - You are preparing the tax section of your company's financial statements. During the current year 2019, your company acquired equipment that cost $3.6 million. The ending balance shows a deferred tax liability of $18,000 related to equipment. The equipment is being depreciated over six years for financial reporting purposes and is a Class 8 - 20% for tax purposes with half in year of acquisition. Depreciation expense was $300,000 for accounting purposes for 2019. Income before tax for 2019 was $440,000. Your company follows the APSE future/deferred income taxes method.
The following items caused the only differences between accounting income before income tax and taxable income in 2019.
1. Meals and entertainment expenses (only 50% deductible for tax) were $48,000 for 2019.
2. The company paid your annual golf membership of $12,000.
3. In 2019, the company paid rent of $300,000. $100,000 related to 2019, and $100,000 relates to each of 2020 and 2021. Rent is deductible when paid for tax purposes.
4. The company accrued warranty expenses of $36,000. Cash payments related to warranties were $18,000.
5. Depreciation expense was $300,000 and CCA was $360,000 for 2019.
6. Income tax rates have not changed over the past five years.
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