Marigold Ltd. began business on January 1, 2019. At December 31, 2019, it had a $62,400 balance in the Deferred Tax Liability account that pertains to property, plant, and equipment acquired on July 1, 2019 at a cost of $960,000. The property, plant, and equipment is being depreciated on a straight-line basis over six years for financial reporting purposes, and is a Class 8-20% asset for tax purposes. Marigold’s income before income tax for 2020 was $61,000. Marigold Ltd. follows IFRS.

The following items caused the only differences between accounting income before income tax and taxable income in 2020.

1.		In 2020, the company paid $51,600 for rent; of this amount, $17,200 was expensed in 2020. The other $34,400 will be expensed equally over the 2021 and 2022 accounting periods. The full $51,600 was deducted for tax purposes in 2020.
2.		Marigold Ltd. pays $9,900 a year for a membership in a local golf club for the company’s president.
3.		Marigold Ltd. now offers a one-year warranty on all its merchandise sold. Warranty expenses for 2020 were $9,200. Cash payments in 2020 for warranty repairs were $4,600.
4.		Meals and entertainment expenses (only 50% of which are ever tax deductible) were $11,100 for 2020.
5.		The maximum allowable CCA was taken in 2020. There were no asset disposals for 2020. Assume the PPE is considered “eligible equipment” for purposes of Accelerated Investment Incentive (under the AII, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate).

Income tax rates have not changed since the company began operations.

Calculate the balance in the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2020.

Calculate income tax payable for 2020.

Prepare the journal entries to record income taxes for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income tax.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Indicate how deferred taxes should be presented on the December 31, 2020 SFP.

Indicate how deferred taxes should be presented on the December 31, 2020 balance sheet if Marigold reported under ASPE.

Answer rating: 100% (QA)

Answer Balance of Deferred Tax Liability as of 31st December 2020 is 63660 Particulars Amount Amo... View the full answer