ACC Inc. (ACC) began operations as a software designer on January 1, 2021. On that day, it acquired equipment at a cost of $200,000, with an estimated useful life of eight years and NO residual value. ACC uses straight-line depreciation. For tax purposes, the capital cost allowance was $20,000 in 2021 and $36,000 in 2022. Starting January 1, 2022, in its second year of operations, ACC implemented a two-year warranty on the products it sells. During 2022, ACC accrued warranty expenses of $60,000 but had only incurred expenditures of $20,000 relating to its warranty. ACC has NOT had any permanent differences between accounting and taxable income. ACC had taxable income of $400,000 in 2022. ACC was subject to tax at a rate of 40% in 2021. In July 2022, the government unexpectedly changed the tax rate for 2022 to 30%. The tax rate for 2023 has NOT been substantively enacted. 

Required: a) Prepare a detailed calculation of ACC’s accounting income before income taxes for 2022, working backward from taxable income to accounting income before taxes. 

b) Calculate ACC’s deferred tax asset or liability as at December 31, 2022.

Answer rating: 100% (QA)

To calculate ACC Incs accounting income before income taxes for 2022 and the deferred tax asset or liability as of December 31 2022 we need to conside... View the full answer