Geoff Corp.'s operations in 2014 had mixed results. One division, Vincent Group, again failed to earn income at a rate that was high enough to justify its continued operation, and management therefore decided to close the division. Vincent Group earned revenue of $118,000 during 2014 and recognized total expenses of $110,500. The remaining two divisions reported revenues of $273,000 and total expenses of $216,000 in 2014.
In preparing the annual income tax return, Geoff Corp.'s controller took into account the following information:
1. The CCA exceeded depreciation expense by $3,700. There were no depreciable assets in the Vincenti Group division.
2. Included in Vincenti's expenses is an accrued litigation loss of $5,100 that is not deductible for tax purposes until 2015.
3. Included in the continuing divisions' expenses are the president's golf club dues of $4,500, and included in their revenues are $1,700 of dividends from taxable Canadian corporations.
4. There were no deferred tax account balances for any of the divisions on January 1, 2014.
5. The tax rate for 2014 and future years is 35%.
6. Geoff Corp. reports under IFRS.
Instructions
(a) Calculate the taxable income and income tax payable by Geoff Corp. in 2014 and the deferred tax asset or liability balances at December 31, 2014.
(b) Prepare the journal entry (ies) to record income tax for 2014.
(c) Indicate how income taxes will be reported on the income statement for 2014 by preparing the bottom portion of the statement, beginning with "Income before income tax and discontinued operations." Assume that 10,000 common shares were outstanding throughout 2014.
(d) Provide the statement of financial position presentation for any resulting deferred tax accounts at December 31, 2014. Be specific about the classification.
(e) How would your response to (d) change if Geoff Corp. followed the ASPE future/deferred income taxes method?