Refer to E18-7 for Sayaka Tar and Gravel Ltd., and assume the same facts as in E18-8 for the fiscal year ended December 31, 2018, except that the enacted tax rate for 2019 and subsequent years was reduced to 20% on September 15, 2018.

In E18-7

Sayaka Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company obtained a contract to construct a road for the municipality of Cochrane West, and it is estimated that the project will be completed over a three-year period starting in June 2017. Sayaka uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Sayaka uses the completed-contract method allowed by the CRA. By its first fiscal year end, the accounts related to the contract had the following balances:

Accounts Receivable ................................................. $320,000

Construction in Process ............................................... 500,000

Revenue from Long-Term ............................................ 500,000

Contracts Construction ................................................ 350,000

Expenses Billings on Construction in Process ...................... 400,000

The accounts related to the equipment that Sayaka purchased to construct the road had the following balances at the end of the first fiscal year ended December 31, 2017 for accounting and tax purposes:

Equipment ............................................................ $1,100,000

Accumulated Depreciation-Equipment ............................. 170,000

Undepreciated Capital Cost ........................................... 980,000

In E18-8

Refer to E18-7 for Sayaka Tar and Gravel Ltd., and assume the same facts for the fiscal year ended December 31, 2017. For the second year of operations, Sayaka made progress on the construction of the road for the municipality. The account balances at December 31, 2018 for the construction project and the accounting and tax balances of accounts related to the equipment used for construction follow. (The balances at December 31, 2017 are also listed.)

Instructions
(a) Prepare the journal entry to record the effect of the change in the enacted tax rate.
(b) Calculate any deferred tax balances at December 31, 2018.
(c) Calculate taxable income and income tax payable for 2018.
(d) Prepare the journal entries to record income taxes for 2018.
(e) Prepare a comparative income statement for 2017 and 2018, beginning with the line "Income before income tax" and provide details about the components of income tax expense.
(f) Provide the comparative statement of financial position presentation for any resulting deferred tax balance sheet accounts at December 31, 2017 and 2018. Be specific about the classification.
(g) Repeat the balance sheet presentation in part (f) assuming Sayaka follows ASPE.

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2018 2017 Accounts Receivable Construction in Process Revenue from Long-Term Contracts Construction Expenses Billings on Construction in Process Equipment Accumulated Depreciation- Equipment Undepreciated Capital Cost $105,000 940,000 440,000 410,000 390,000 1,100,000 460,000 620,000 $ 320,000 500,000 500,000 350,000 400,000 1,100,000 170,000 980,000