Melissa Inc. reports accounting income of $105,000 for 2014, its first year of operations. The following items

Question:

Melissa Inc. reports accounting income of $105,000 for 2014, its first year of operations. The following items cause taxable income to be different than income reported on the financial statements.

1. Capital cost allowance (on the tax return) is greater than depreciation on the income statement by $16,000.

2. Rent revenue reported on the tax return is $24,000 higher than rent revenue reported on the income statement.

3. Non-deductible fines appear as an expense of $15,000 on the income statement.

4. Melissa's tax rate is 30% for all years and the company expects to report taxable income in all future years. Melissa reports under the ASPE future/deferred income taxes method.

Instructions

(a) Calculate taxable income and income tax payable for 2014.

(b) Calculate any deferred tax balances at December 31, 2014.

(d) Prepare the income tax expense section of the income statement for 2014, beginning with the line "Income before income tax."

(e) Reconcile the statutory and effective rates of income tax for 2014.

(f) Provide the balance sheet presentation for any resulting deferred tax balance sheet accounts at December 31, 2014. Be specific about the classification.

(g) Repeat part (f) assuming Melissa follows IFRS.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...