(Appendix 8A): Deferred (Future) Income Tax: Depreciation

Assume the company calculates depreciation using the straight-line method.
The company recently purchased one piece of equipment for the business at \(\$ 50,000\) on January 1, 2017. The equipment has a four-year estimated life and no residual value. The company calculated and recorded capital cost allowance for tax purposes for 2017 of \(\$ 6,000\) and for 2018 of \(\$ 10,000\). The average income tax rate is \(30 \%\) for 2017 and 2018 and for the foreseeable future.
\section*{Required:}
For 2017 and 2018, calculate

(a) the income taxes payable to Canada Revenue Agency and

(b) the deferred income tax. Is the deferred income tax a liability or an asset? Explain.

\section*{Problem

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Pretax accounting income 2018 2017 $350,000 $250,000