Reference no: EM132744699
Question - Solar Systems Inc., started operations in 2018 and uses IFRS. The following financial information was provided to you, reported as at December 31, 2019:
Solar Systems, Inc. 2019
Revenues $810,000
Depreciation expense 150,000
Other operating expenses 530,000
Property, Plant and Equipment, cost $1,400,000
Accumulated depreciation 230,000
Unearned rent revenue $40,000
Additional information:
Solar Systems has a tax rate of 25% in 2018, 30% in 2019 and 35% in 2020 enacted in February each year.
Solar Systems claimed total capital cost allowance for tax purposes of $255,000 in 2018 and $160,000 in 2019.
In 2018 Solar Systems sold an excess parcel of land for an amount of $500,000, generating a gain of $200,000. The receipt of cash from this sale was 30% down payment with the balance to be received, 40% in 2019 and 30% in 2020. However, this gain is taxed in the year it is received.
The unearned rent revenue represents cash received in 2019 from a tenant who will be moving into the building on February 1, 2020, and relates to rent due in 2020. For tax purposes any cash received for future rent is taxed when the cash is received.
Revenue in 2019 includes dividends received from taxable Canadian corporations of $10,000 and is not taxable.
Required -
1. Prepare the tax related journal entries to record income taxes for 2019. Show in detail computations to support your answers.
2. What are the deferred tax amounts to report on the balance sheet for years ended December 31, 2018 and 2019 and how would they be classified? If ASPE was used how would they be classified?
3. Prepare the income statement beginning with "income before taxes" for 2019.
4. For this part only, assuming that in 2018 a taxable loss of $500,000 was incurred and that it was thought at the time that only 40% of that amount would be likely to be applicable against future taxable incomes. What journal entry or entries done in part 1 -3 above would be changed, added, or removed?
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