Sharma Corporation has decided that, in preparing its 2014 financial statements under IFRS, two changes should be made from the methods used in prior years:
1. Depreciation. Sharma has used the tax basis (CCA) method of calculating depreciation for financial reporting purposes. During 2014, management decided that the straight-line method should have been used to calculate depreciation for financial reporting purposes for the years prior to 2014 and going forward. The following schedule identifies the excess of depreciation based on CCA over depreciation based on straight-line, for the past years and for the current year:
Excess of CCA-based Depreciation
over Straight-Line Depreciation
Calculated for Financial Statement Purposes
Prior to 2013 ............................... $1,365,000
2013 ......................................... 106,050
2014 ......................................... 103,950
$1,575,000
Depreciation is charged to cost of sales and to selling, general, and administrative expenses on the basis of 75% and 25%, respectively.
2. Bad debt expense. In the past, Sharma recognized bad debt expense equal to 1.5% of net sales. After careful review, it has been decided that a rate of 1.75% is more appropriate for 2014. Bad debt expense is charged to selling, general, and administrative expenses.
The following information is taken from preliminary financial statements, which were prepared before including the effects of the two changes.

There have been no temporary differences between any book and tax items prior to the above changes except for those that involve the allowance for doubtful accounts. For tax purposes, bad debts are deductible only when they are written off. The tax rate is 30%.
Instructions
(a) For each of the items that follow, calculate the amounts that would appear on the comparative (2014 and 2013) financial statements of Sharma Corporation after adjustment for the two accounting changes. Show amounts for both 2014 and 2013, and prepare supporting schedules as necessary.
1. Accumulated depreciation
2. Deferred tax asset/liability
3. Selling, general, and administrative expenses
4. Current income tax expense
5. Deferred tax expense
(b) Prepare the comparative financial statements that will be issued to shareholders for Sharma's year ended December 31, 2014. Assume that no dividends were declared in 2013.

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SHARMA CORPORATION Condensed Statement of Financial Position December 31, 2014 Assets Current assets Plant assets, at cost Less: Accumulated depreciation Other long-term assets* 2014 $28,340,000 45,792,000 23,761,000 15,221,000 $65,592,000 2013 $29,252,000 43,974,000 22,946,000 14,648,000 $64,928,000 Liabilities and Shareholders' Equity Current liabilities Long-term debt Share capital Retained earnings $21,124,000 15,154,000 11,620,000 17,694,000 $65,592,000 $23,650,000 14,097,000 11,620,000 15,561,000 $64,928,000 SHARMA CORPORATION Condensed Income Statement Year Ended December 31, 2014 2014 $80,520,000 54,847,000 25,673,000 19,540,000 6,133,000 (1,198,000) 4,935,000 1,480,500 3,454,500 2013 $78,920,000 53,074,000 25,846,000 18,411,000 7,435,000 (1,079,000) 6,356,000 1,906,800 $4,449,200 Net sales Cost of goods sold Selling, general, and administrative expenses Other expense, net Income before income tax Income tax Net income