In 2019, its first year of operations, Alpha Corporation, a public corporation using IFRS, reported the...
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In 2019, its first year of operations, Alpha Corporation, a public corporation using IFRS, reported the following information: a. Income before income taxes was $2,200,000. b. The company acquired capital assets costing $3,600,000; depreciation was S240,000 and CCA was $180,000. c. The company recorded an expense of $500,000 for the one-year warranty on the company's products; cash disbursements amounted to $380,000. d. The company incurred development costs of $200,000 that were capitalized. Development work was still ongoing at year-end and no amortisation was deducted. (For tax purposes, development costs are deducted when incurred.) e. The company made a political contribution of $20,000 to a local politician. f. The income tax rate was 38%. In 2020, its second year of operations, Alpha reported the following: a. Legislation was enacted that changed the tax rate to 40%. b. Income before income tax was $4,500,000. c. Depreciation was $240,000; CCA was $342,000. d. The estimated warranty costs were S600,000, while the cash expenditure was $550,000. e. Additional development costs of $150,000 were incurred to complete the project. Amortization of S58,000 was recorded. f. Golf club memberships for top executives cost $50,000. Required: 1. Calculate taxable income for 2019 and 2020. Show the adjustments necessary by completing table below. (7 marks) 2019 2020 Accounting Income: S2,200,000 $4,500,000 Taxable Income Question # 4 (cont'd) 2. Prepare the joumal entries to record income tax expense, deferred taxes and income tax payable in 2019 and 2020 for Alpha Corporation. (8 marks) 2019: Debit Credit 2020: Debit Credit In 2019, its first year of operations, Alpha Corporation, a public corporation using IFRS, reported the following information: a. Income before income taxes was $2,200,000. b. The company acquired capital assets costing $3,600,000; depreciation was S240,000 and CCA was $180,000. c. The company recorded an expense of $500,000 for the one-year warranty on the company's products; cash disbursements amounted to $380,000. d. The company incurred development costs of $200,000 that were capitalized. Development work was still ongoing at year-end and no amortisation was deducted. (For tax purposes, development costs are deducted when incurred.) e. The company made a political contribution of $20,000 to a local politician. f. The income tax rate was 38%. In 2020, its second year of operations, Alpha reported the following: a. Legislation was enacted that changed the tax rate to 40%. b. Income before income tax was $4,500,000. c. Depreciation was $240,000; CCA was $342,000. d. The estimated warranty costs were S600,000, while the cash expenditure was $550,000. e. Additional development costs of $150,000 were incurred to complete the project. Amortization of S58,000 was recorded. f. Golf club memberships for top executives cost $50,000. Required: 1. Calculate taxable income for 2019 and 2020. Show the adjustments necessary by completing table below. (7 marks) 2019 2020 Accounting Income: S2,200,000 $4,500,000 Taxable Income Question # 4 (cont'd) 2. Prepare the joumal entries to record income tax expense, deferred taxes and income tax payable in 2019 and 2020 for Alpha Corporation. (8 marks) 2019: Debit Credit 2020: Debit Credit
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Calculation of Taxable Profits Particulars 2019 2020 Accounting income 220000000 450000000 Depreciat... View the full answer
Related Book For
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
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