The records for Cowboys Inc. show the following data for calendar 2020: 1. Golf club dues were
Question:
The records for Cowboys Inc. show the following data for calendar 2020:
1. Golf club dues were $ 4,800.
2. Machinery was acquired in January 2020 for $ 400,000. Cowboys uses straight-line depreciation over a ten-year life (no residual value). For tax purposes, Cowboys uses CCA at 14% for 2020 after considering the half-year rule.
3. Dividends received from a Canadian corporation were $ 4,000.
4. The estimated warranty liability related to 2020 sales was $ 19,600. Warranty repair costs paid during 2020 were $ 13,600. The remainder will be paid in 2021.
5. Cowboys expensed $2,500 on fines related to late filing of the HST.
6. Pre-tax accounting income is $ 350,000. The enacted income tax rate is 26.5%.
Instructions
a) Prepare a schedule (starting with pre-tax accounting income) to calculate taxable income.
b) Prepare the required adjusting journal entries to record income taxes for 2020.
