Kalitta Corporation reported the following information at the beginning of its current fiscal year: Deferred income tax asset (warranties) $ 4,500 (dr) Deferred income tax liability (depreciable assets) 10,500 (cr) During the year, Kalitta reports the following information: -Pre-tax accounting loss was $120,000 and the tax rate was 32% which is expected to remain stable in the future. -Depreciation expense was $70,000 and the CCA was $0. The carrying amount of property, plant, and equipment at the end of the year was $400,000 while the UCC was $435,000; -Warranty expense was reported at $40,000 while actual cash paid out was $30,000. The warranty liability had a year-end balance of $25,000. -No other items affected deferred tax amounts other than these transactions. Any tax losses are to be carried forward. -A non-taxable dividend of $10,000 was received in the year. 

Required: 

1) Determine the amount of NBV and UCC at the beginning of the year. 

2) Determine the tax loss or taxable income for the year. 

3) Prepare the journal entries to record income tax for the year. 

4) Provide the income statement section commencing with “Net income before taxes.”

Answer rating: 100% (QA)

Warranty provisions are disallowed in income tax and allowed on actual cash payment basis Book profi... View the full answer