Amalgamated Equipment Co., which provides equipment to motels and hotels, began operations in 2021. The following...
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Amalgamated Equipment Co., which provides equipment to motels and hotels, began operations in 2021. The following information applies to the year ending December 31, 2022: • Accounting income before taxes on the 2022 income statement is $1,000,000. • 3-year warranty is provided on merchandise sold. The estimated warranty expense recorded for accounting purposes for the year ended December 31, 2021 was $50,000 more than repair costs allowed for tax purposes. Warranty expense reported on the income statement for 2022 was $60,000; the tax-deductible costs to service the warranties amounted to $35.000 for 2022. • $20,000 was spent in 2022 on meals and entertainment for clients. Only one-half of this amount is deductible for tax purposes. • $40,000 dividends were received and recorded as revenue in 2022. Dividends received are not taxable. • For 2022, depreciation expense on equipment was S80,000 while CCA (capital cost allowance) claimed on the income tax return was $90,000. For the year ended December 31, 2021 the CCA exceeded depreciation expense by $80,000. On January 1, 2022, $40,000 was received from a tenant for a 2 year lease rental for the period January 1, 2022 to December 31, 2023. This amount is fully taxed in 2022. • The applicable tax rate for 2021 and previous years was 20%. In 2022 the government passed a budget that enacted a 25% rate for 2022 and future years. • Amalgamated reports under IFRS. See workspace below for requirements. Show supporting calculations to earn partial marks. Requirement 1: Provide a reconciliation of accounting income to taxable income and prepare the required journal entry to record current income tax expense/benefit for 2022. Reconciliation from accounting to taxable income: Amalgamated Equipment Co., which provides equipment to motels and hotels, began operations in 2021. The following information applies to the year ending December 31, 2022: • Accounting income before taxes on the 2022 income statement is $1,000,000. • 3-year warranty is provided on merchandise sold. The estimated warranty expense recorded for accounting purposes for the year ended December 31, 2021 was $50,000 more than repair costs allowed for tax purposes. Warranty expense reported on the income statement for 2022 was $60,000; the tax-deductible costs to service the warranties amounted to $35.000 for 2022. • $20,000 was spent in 2022 on meals and entertainment for clients. Only one-half of this amount is deductible for tax purposes. • $40,000 dividends were received and recorded as revenue in 2022. Dividends received are not taxable. • For 2022, depreciation expense on equipment was S80,000 while CCA (capital cost allowance) claimed on the income tax return was $90,000. For the year ended December 31, 2021 the CCA exceeded depreciation expense by $80,000. On January 1, 2022, $40,000 was received from a tenant for a 2 year lease rental for the period January 1, 2022 to December 31, 2023. This amount is fully taxed in 2022. • The applicable tax rate for 2021 and previous years was 20%. In 2022 the government passed a budget that enacted a 25% rate for 2022 and future years. • Amalgamated reports under IFRS. See workspace below for requirements. Show supporting calculations to earn partial marks. Requirement 1: Provide a reconciliation of accounting income to taxable income and prepare the required journal entry to record current income tax expense/benefit for 2022. Reconciliation from accounting to taxable income:
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor-Yi Tsay, Philip Old
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