Ahhchu Inc., had the following balances reported in its financial books at the end of 2023. Th
Question:
Ahhchu Inc., had the following balances reported in its financial books at the end of 2023. Th company follows ASPE an uses the deferred tax method.
CCA in excess of accounting depreciation $ 1,600,000
Corresponding DTL $ 448,000
Pension expenses in excess of pension contributions $ 300,000
Corresponding DTA $ 84,000
The company reported $694,000 of accounting income before tax for the year ended December 31, 2024.
The following additional information related to 2024 was also provided.
- Depreciation reported on the income statement was $320,000 meanwhile allowable CCA was $230,000.
- Non-taxable dividends received from Canadian companies amounted to $18,000 in 2023 and $26,000 in 2024.
- The company recorded pension expense of $67,000 and made cash contributions of $87,000 during 2024.
- Entertainment costs related to the business for the year amounted to $36,000. Only 25% were deductible for tax purposes.
- During the year, the company recorded allowances for warranty costs amounting to $42,000, related to extended warranties issued. These costs would not be incurred till 2026.
- In 2024, the company accrued and recorded $160,000 for development costs. Only 85% of these costs are tax deductible.
- The tax rate changed to 20% for the years 2024 and onwards.
Required:
1. Determine taxable income. Make sure to show all work by preparing a statement showing the reconciliation.
2. Determine tax payable for 2024 and record the journal entry.
3. Prepare the journal entry for deferred income tax effects for 2024.
4. Determine the ending 2024 deferred income tax balance and show how this is to be reported on the balance sheet as at December 31, 2024 under IFRS.