Question

Melissa Inc. reports accounting income of $105,000 for 2011. The following items cause taxable income to be different than income reported on the financial statements.
1. Capital cost allowance (on the tax return) is greater than depreciation on the income statement by $16,000.
2. Rent reported on the tax return is $24,000 higher than rent earned on the income statement.
3. Non-deductible fines for pollution appear as an expense of $15,000 on the income statement.
4. Melissa’s tax rate is 30% for all years and the company expects to report taxable income in all future years. There are no future taxes at the beginning of 2011. Melissa reports under the PE GAAP future income taxes method.
Instructions
(a) Calculate taxable income and income taxes payable for 2011.
(b) Calculate any future income tax balances at December 31, 2011.
(c) Prepare the journal entries to record income taxes for 2011.
(d) Prepare the income tax expense section of the income statement for 2011, beginning with the line “Income before income taxes.”
(e) Reconcile the statutory and effective rates of income tax for 2011.
(f) Provide the balance sheet presentation for any resulting future tax balance sheet accounts at December 31, 2011. Be specific about the classification.
(g) Repeat part (f) assuming Melissa follows IFRS.


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  • CreatedAugust 23, 2015
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