Exam 16: Corporate Income Tax

JMR Corporation has income before tax of $800,000.Included in this amount are meals and entertainment amounting to $9,000, warranty costs of $100,000 ($65,000 in warranty claims), depreciation $94,000 and dividends from a taxable Canadian Corporation of $15,000.CCA for the year amounted to $90,000 and the tax rate is 40%.Calculate income tax expense.

KER commenced operations in 2013.The company had recorded an accrual for warranty expenses in its books during the year ended December 31, 2013, its first year of operations, amounting to $100,000.During the year 2014, customers required service from goods sold in 2014 amounting to $60,000.There were no similar expenditures made during 2013.KER recorded an amount for possible warranty costs for goods sold during the year in the amount of $95,000.Accounting income amounted to $80,000 and the tax rate is 40%.Assuming that KER has no other differences between accounting and tax what are the current and deferred income tax amounts that will appear on the 2014 statement of financial position?

The use of inter-period income tax allocation is mandatory under ASPE.

Ryan Company paid the golf dues of one of its employees.This represents a temporary difference.

JMR Corporation has income before tax of $800,000.Included in this amount are meals and entertainment amounting to $9,000, warranty costs of $100,000 ($65,000 in warranty claims), depreciation $94,000 and dividends from a taxable Canadian Corporation of $15,000.CCA for the year amounted to $90,000.Calculate taxable income.

In Canada, tax rates are usually enacted in the year to which they pertain.

All of the following are all justifications for the use of the comprehensive allocation method except for:

Prepayments of Deferred income tax expense may be viewed as a deferred tax asset.

EGR Company provided you with the following information: 2013 Net Income: $1,500,000 2014 Net Income: $900,000 2013 Tax rate: 35% 2014 Tax rate: 40% In addition, the only difference between accounting and tax are warranty costs accrued of $100,000 i 2013.No actual warranty expenses were incurred in 2013 or 2014.Prepare journal entries for 2013 and 2014 to record income tax expense.

On January 1, Year 2, GHI Inc.had depreciable assets with a book value of $920,000 and a historical cost of $1,000,000.CCA totalling $100,000 had been taken on these assets.During Year 2, depreciation of $80,000 and CCA of $20,000 had been taken on these assets.The tax rate in effect is 35%.For Year 2, the temporary differences arising from the above would result in:

STR provided the following data related to income tax allocation: The deferred tax account showed a zero balance at the start of 2009.There was only one temporary difference, a revenue amount, which was taxable in 2009, but was recorded for accounting purposes in 2010.There are no carry backs or carry forwards.The journal entry to record the income tax consequences for 2009 would include a:

The existence of deferred tax assets on the balance sheet is dependent on a company's going concern status.

The taxes payable method results in better matching than does the comprehensive allocation method.

Explain the difference between a temporary and permanent difference.

Provide some arguments for and against the discounting of deferred tax amounts, and explain why these are not discounted.

An example of a "deductible amount" occurs when:

Deferred income tax liabilities are amounts owed to the government.

JMR Corporation sold a truck resulting in a capital gain of $11,000.$5,500 represents a:

"Taxable amounts" include revenues and gains that are included in the tax return BEFORE they are recognized for accounting purposes.

KG Company had capital assets with a carrying value of $1,560,000 and a tax value of $1,670,000.In addition they had an accrued warranty liability of $80,000 of which $20,000 had actually been incurred and golf club dues in the amount of $3,000.Calculate the temporary difference deductible (taxable).