Wassup Construction Ltd. (WCL) , a publicly accountable enterprise, had the following tax-related amounts at the beginning of 2014:

The Construction in Process account = $900,000.

The gross profit on incomplete jobs = $300,000.

Equipment, net of accumulated depreciation of $100,000 = $850,000.

UCC of Equipment = $750,000.

Information related to the year 2014 was as follows:

Accounting income before tax = $1,800,000

Income tax installment for 2014 paid on July 5, 2014 = $100,000

The gross profit on incomplete jobs as at December 31, 2014 = $250,000.

Items included in arriving at income before tax:

Depreciation expense on owned equipment = $300,000

Equity pickup recorded from investment in affiliated company = $128,000

Dues paid for Tennis Club membership = $3,000

Penalty paid for late filing of government forms = $5,000.

Additional information:

Capital Cost Allowance on owned equipment = $375,000. The timing difference will reverse evenly over 3 years.

All jobs are profitable and expected to be completed by end of 2015.

The income tax rate for 2014-2015 is enacted at 40%. The enacted income tax rate for 2016 and future years is 30%. The 2016 rate was enacted in late December 2014. The company follows a December 31 year-end for financial reporting purposes.

Additional Info: The bookkeeper provided you with the following tax-related accounts and balances from the unadjusted trial balance as at December 31, 2014:

Account Name Account Balance Debit or Credit Balance

Construction in process $600,000 Debit

Income tax payable $720,000 Credit

Deferred Tax Liability $160,000 Credit

Income tax expense $820,000 Debit

Equipment $950,000 Debit

Accumulated Depreciation - equipment $400,000 Credit

Required: (round to the nearest dollar)

1. Calculate income tax payable as of December 31, 2014.

2. Prepare all tax-related journal entries (if necessary) to correct the balances reported above for 2014.

Answer rating: 100% (QA)

1 Income tax payable as of December 31 2014 120000 2 Journal entries to correct the balances report... View the full answer