Geoff Corp.'s operations in 2011 had mixed results. One division, Vincent Group, again failed to earn income at a rate that was high enough to justify its continued operation, and management therefore decided to close the division. Vincent Group earned revenue of $118,000 during 2011 and recognized total expenses of $110,500. The remaining two divisions reported revenues of $273,000 and total expenses of $216,000 in 2011.
In preparing the annual income tax return, Geoff Corp.'s controller took into account the following information:
1. The CCA exceeded depreciation expense by $3,700. There were no depreciable assets in the Vincent Group division.
2. Included in Vincent's expenses is an accrued litigation loss of $5,100 that is not deductible for tax purposes until 2012.
3. Included in the continuing divisions' expenses are the president's golf club dues of $4,500, and included in their revenues are $1,700 of dividends from taxable Canadian corporations.
4. There were no future tax account balances for any of the divisions on January 1, 2011.
5. The tax rate for 2011 and future years is 35%.
6. Geoff Corp. reports under IFRS.
Instructions
(a) Calculate the taxable income and income taxes payable by Geoff Corp. in 2011 and the future income tax asset or liability balances at December 31, 2011.
(b) Prepare the journal entry(ies) to record income taxes for 2011.
(c) Indicate how income taxes will be reported on the income statement for 2011 by preparing the bottom portion of the statement, beginning with "Income before taxes and discontinued operations." Assume that 10,000 common shares were outstanding throughout 2011.
(d) Provide the balance sheet presentation for any resulting future tax balance sheet accounts at December 31, 2011. Be specific about the classification.
(e) How would your response to (d) change if Geoff Corp. followed the PE GAAP future income taxes method?