Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020:

Depreciation expense	$540,000
Capital cost allowance	$690,000
Warranty expense	$130,000
Warranty costs incurred	$155,000

Hostra entered into an equipment lease on January 2, 2020. The first lease payment of

$135,000 was made on that date. The interest on the right-of-use asset was $24,000, and the depreciation expense was $75,000. (The depreciation expense on the

right-of-use asset is included in the $540,000 depreciation expense above.).

Hostra’s deferred income tax liability at the beginning of 2020 was based on the following:

• a difference between the carrying value ($7,600,000) and undepreciated capital cost of property, plant, and equipment ($4,300,000)
• a warranty liability of $320,000

The tax rate for the year ended December 31, 2019, was 25%. The tax rate for the year ended December 31, 2020, was 26% (enacted on October 31, 2020), and the tax rate

for the year ended December 31, 2021, is 30% (enacted on December 16, 2020).

Required:

Calculate Hostra’s deferred income tax expense for the year ended December 31, 2020.

Answer rating: 100% (QA)

540000 x 26 140400 690000 x 26 179400 130000 155000 x 26 10200 24000 x 26 6240 Deferr... View the full answer