The following information about Norton Inc. is available for 2020:

1. the accounting income of the year is $ 250,000.
2. Included in the accounting income above is $10,000 dividends income from investments in taxpaying Canadian companies.
3. On January 2, 2019, equipment was purchased for $ 500,000. The excess of CCA resulted a deferred tax liability of $12,250 at December 31, 2019. The depreciation and CCA schedule is as follows:

Year	Depreciation	CCA
2019	$100,000	$150,000
2020	100,000	105,000
2021	100,000	85,000
2022	100,000	80,000
2023	100,000	80,000
	$500,000	$500,000

4. On January 2, 2020, $ 210,000 was collected in advance for the rental of a building for three years. The entire $ 210,000 was included in taxable income in 2020, but two-thirds of the $ 210,000 was reported as unearned revenue on December 31, 2020, for book purposes.
5. The only deferred tax carried on Norton’s balance sheet of December 31, 2019, was the $12,250 deferred tax liabilities associated with the equipment.
6. The enacted tax rate is 30% for 2020 and 2021 and 25% for 2022 and thereafter.

Instructions

1. Determined the taxable income and income tax payable for 2020. Show the details of the adjustments.
2. Determine deferred tax asset and/or liability at the end of 2020. Show the details of your work: the item that give rise to deferred income tax assets/liabilities, whether the temporary difference is a taxable difference or deductible difference and
3. Calculate the net deferred tax expense or benefit for 2020.
4. Prepare the adjusting journal entries to record income tax expense, deferred taxes, and income tax payable for 2020.
5. Prepare the income tax section of the comparative income statement of 2020.

Answer rating: 100% (QA)

Working notes 1 Calculation of Taxable income 250000 Pretax accounting income Permanent differences ... View the full answer