QUESTION:Calculate the current and deferred tax expense for EPL. Be sure to review the details of the pretax income calculation and the additional information provided by the controller to determine temporary and permanent differences. Expense items for calculating differences:lease expense, depreciation, meals and entertainment, warranty and pension expense. My answer is $283,017 and $423,500.

Eastern Publishers Ltd (EPL) is preparing its December 31, 2020 year-end financial statements. EPL focuses on corporate clients by binding and publishing corporate directories, policy manuals, and other large documents along with publishing short novels and books. This is the first year of operations, and a preliminary estimate of pre-tax net income has been calculated as follows:

Revenue	$5,278,500
Cost of goods sold	2,216,970
Gross margin	3,061,530
Operating costs
Advertising	75,485
Amortization	250,000
Bank charges	15,500
Contracted services	17,500
Lease expense	14,525
Meals and entertainment	78,000
Repairs	25,000
Supplies	57,250
Telephone	12,500
Travel	7,850
Utilities	254,800
Warranty	37,500
Wages and benefits	275,000

Total operating costs 1,120,910 Pre-tax net income $1,940,620

You are working in EPL's accounting department and have been asked to prepare a preliminary estimate of the income tax expense. The current tax expense will not be paid until the next fiscal year. The controller of EPL provides you with the following few notes to help you get started:

• The depreciation expense relates to a new machine that was acquired on January 1, 2020 for $5 million and has a useful life of 20 years. This machinery is included as class 43 (30%) for CCA purposes. Note that the half-year rule is in effect for tax purposes.

• EPL provides an assurance-type warranty on its book binding for corporate clients. Corporate clients can return their bound material over a two-year period if the glue breaks down. No books have been returned for rebinding during 2020; however, estimated expenses have been recognized in the current year.

• The lease expense is related to a 3D printer that is being leased for two years for $34,525 per year. The printer has an expected useful life of five years. There is no provision in the lease that would allow EPL to purchase the printer. If purchased, the printer would cost $150,000.

• Included in wages and benefits is accrued pension expense of $7,500. During the year the company contributed $5,000 to its Defined Benefit plan (which was set up at the beginning of the year).

EPL has an average tax rate of 35% and an incremental borrowing rate of 10%. EPL follows ASPE.

QUESTION:Calculate the current and deferred tax expense for EPL. Be sure to review the details of the pretax income calculation and the additional information provided by the controller to determine temporary and permanent differences.