Exam 6: Accounting for Income Taxes

The following information relates to the accounting income for Saskatchewan Real Estate Company (SREC)for the current year ended December 31. During the year,the company sold one of its buildings with carrying value of $780,000 for proceeds of $1,000,000,resulting in an accounting gain of $220,000.This gain has been included in the pre-tax income figure of $670,000 shown above.For tax purposes,the acquisition cost of the building was $870,000.For purposes of CCA,it is a Class 1 Asset,which treats each building as a separate class.The undepreciated capital cost (UCC)on the building at the time of disposal was $660,000. Required: Prepare the journal entries to record income taxes for SREC.

How much tax expense would be recorded under the accrual method for FY2018?

What is the deferred tax liability under the deferral method for FY2018?

When will there be recapture and a capital gain?

The following information relates to the accounting income for Withering Press Company (WPC)for the current year ended December 31. The company had purchased land some years ago for $600,000.Recently,it was discovered that this land is contaminated by industrial pollution.Because of the soil remediation costs required,the value of the land has decreased.For tax purposes,the impairment loss is not currently deductible.In the future when the land is sold,half of any losses is deductible against taxable capital gains (ie.,the other half that is not taxable or deductible is a permanent difference). The deferred income tax liability account on January 1 had a credit balance of $45,000.This balance is entirely related to property,plant,and equipment (PPE). Required: Prepare the journal entries to record income taxes for WPC.

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 30%.

A company has income before tax of $350,000,which includes a permanent difference of $65,000 relating to non-taxable dividend income.There are no other permanent or temporary differences.The income tax rate is 45%.The taxes payable are:

In the first two years of operations,a company reports taxable income of $115,000 and $165,000,respectively.In the first two years,the tax rates were 38% and 32% respectively.It is now the end of the third year,and the company has a loss of $160,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 25%. Required: a.How much tax was paid in year 1 and year 2? b.Compute the amount of income tax payable or receivable in the current (third)year.

Which statement is accurate?

What is the income tax payable under the deferral method for FY2018?

SEG Company reported $490,000 in income tax expense for the year under the accrual method.Its balance sheet reported an overall increase in deferred income tax liability of $20,000 and a decrease in income tax payable of $25,000.How much would SEG report as income tax expense had it used the taxes payable method?

A company earns $390,000 in pre-tax income,while its tax return shows taxable income of $280,000.At a tax rate of 35%,how much is the income tax expense under the taxes payable method permitted under ASPE?

In 2017,Harry,Burly and Toe Co.sells its single machine,which cost $100,000 and has an undepreciated capital cost (UCC)of $25,000 for tax purposes.For financial reporting,the machine has carrying amount of $40,000.The sale price of the machine is $30,000.Aside from the sale of the machine,the company has other income (before taxes)of $600,000,which includes non-taxable dividends of $120,000 dollars received during the year.There are no other permanent or temporary differences.The company faces an income tax rate of 35%. Required: Provide the journal entries for the company for 2017.

What adjustment is required to the opening deferred taxes as a result of the rate change?

Which is correct regarding the effect of tax rate changes on income tax expense,assets and liabilities?

Match the following terms with their definitions.

Which of the following is an example of a "permanent difference"?

How much tax would be reported under the taxes payable method for FY2017?

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Required: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

Summarize the IFRS rules for presentation and disclosure of taxes on discontinued operations and comprehensive income.