For the year ended December 31, 2020, Sweet Ltd. reported income before income taxes of $190,500. Prior to 2020 taxable
For the year ended December 31, 2020, Sweet Ltd. reported income before income taxes of $190,500. Prior to 2020 taxable income and accounting income was the same each year.
In 2020, Sweet Ltd. paid $123,900 for advertising; of this amount, $41,300 was expensed in 2020. The remaining $82,600 was treated as a prepaid expense for accounting purposes and would be expensed equally over the 2021-2022 period. The full $123,900 was deductible for tax purposes in 2020.
The company paid $32,500 in 2020 for membership in a local golf club (which was not deductible for tax purposes).
In 2020 Sweet Ltd. began offering a 1-year warranty on all merchandise sold. Warranty expenses for 2020 were $25,200, of which $20,300 was actual repairs for 2020 and the remaining $4,900 was estimated repairs to be completed in 2021.
Meal and entertainment expenses totaled $43,200 in 2020, only half of which were deductible for income tax purposes.
Depreciation expense for 2020 was $104,900. Capital Cost Allowance (CCA) claimed for the year was $136,700. Depreciation and CCA relate to an asset that was purchased on January 1, 2020 for $524,500.
Sweet was subject to a 25% income tax rate for 2020. Sweet follows IFRS.
1.Calculate taxable income and taxes payable for 2020.
Taxable income $
Income taxes payable $
2. Prepare the journal entries to record 2020 income taxes (current and deferred).
(To record current tax expense.)
(To record deferred tax expense.)