The following information relates to Happy Corporation's (Happy) transactions during 2020, its first year of operations.
 Income before income tax on the income statement for 2020 was $64,000.
 Income before income tax ($64,000 above) is net (after) of a loss due to the writedown of land of $46,000.
 The tax rate enacted for 2020 and future years is 30%. Because this was Happy Corporation's first taxation year, no instalments on account of income taxes were required or paid by Happy.
Differences between the 2020 GAAP amounts and their treatment for tax purposes were as follows:
a. Depreciation of property, plant, and equipment for financial reporting purposes amounted to $60,000. CCA charged on the tax return amounted to $80,000. The related property, plant, and equipment cost $300,000 when it was acquired early in 2020.
b. Of the loss on writedown of land of $46,000, 25% will never be tax-deductible. The remaining 75% will be deductible for tax purposes evenly over the years from 2021 to 2023. The loss relates to the loss in value of company land due to contamination.
c. Warranty expense accrued for financial reporting purposes amounted to $15,000. Warranty payments deducted for taxes amounted to $12,000. Warranty liabilities were classified as current on the SFP.
d. Dividend revenue earned on an investment was tax exempt and amounted to $1,400.
e. Gross profit on construction contracts using the percentage-of-completion method for book purposes amounted to $30,000. For tax purposes, gross profit on construction contracts amounted to $0 because the completed-contract method is used, and no contracts were completed during the year.
f. A $3,500 fine paid for a violation of pollution laws was deducted in calculating accounting income.
Happy Corporation follows IFRS.
Required:
1) Calculate the taxable income for 2020. Show all details of the adjustments to accounting income to arrive at taxable income.
2) Calculate Happy Corporation's deferred tax asset or liability at December 31, 2020.
3) Prepare the journal entry(ies) to record income taxes for 2020.
4) Prepare a partial 2020 income statement, beginning with “Income before income tax.”

Answer rating: 100% (QA)

287 answers Explanation 1Calculate Sheeren Corporations deferred tax asset or liability at December ... View the full answer