2 SPECIE for me 3 NOTE: THE QUESTION DATA HAS BEEN PRODUCED TWICE FOR EASE OF REFERENCE. ONCE ON THE CURRENT TAX TAB AND ONCE ON THIS TAB (DEFERRED TAX). THE DATA IS IDENTICAL ON EACH TAB. boxes 4 Patio Co. began operations in 2018 and follows IFRS. You, senior accountant of Patio Co., are working on the 2020 year's tax calculation and noted the following information: 7 8 (1). For the year-ended December 31, 2020, Patio Co. reported a $500,000 accounting income before income tax expense. This 10 amount includes a before tax loss from discontinued operations of 11 $50,000, of which only one-half is tax deductible. 12 9 9 The company began operations in 2018 and the following are (2) differences between accounting and taxable income: DR/(CR) 13 14 Item 2018 2019 2020 Reported on income statement: 15 16 Warranty 17 18 19 Estimated warranty expense Depreciation expense Non-deductible expenses Non-taxable income Advertising expense (see note 3) $18,000 $27,000 $43,000 48,000 48,000 48,000 2,000 5,000 8,000 5,000 8,000 6,700 37,500 DR / (CR) 20 21 22 Reported on tax return: 21 22 Reported on tax return: 23 Actual warranty costs incurred $15,000 $20,000 $50,000 24 Capital cost allowance 32,000 57,000 60,000 25 Advertising costs (see note 3) 75,000 26 (3). Patio Co. signed a two-year advertising service with the local radio station on January 1, 2020 for the period January 1, 2020 to December 31, 2021. The total fees of $75,000 were paid on January 27 1, 2020. 28 (4). The warranty covers all parts and labor for a one-year time period. (5). The tax rate for 2018 and 2019 was 30%. The tax rate for 2020 and future years is 25%. The new rate was enacted in November, 2020 and was unknown prior to that date. 9 future year's is 237. He new idle was endleu LT, LULU and was unknown prior to that date. dro 29 nu REQUIRED PART B: Deferred Income Taxes (15 marks) 30 31 (a). Prepare a schedule to calculate deferred income tax expense for the 32 year ended December 31, 2020 (located in columns 1 to 0); (b). Prepare the appropriate journal entries on December 31, 2020 33 (located in columns Q to T); AND (c). Prepare the appropriate financial statement presentation associated with deferred income taxes ONLY (to right Rows 31-33). 34 35 ITEM Required: DERRED TAXURRENTS Rate Hequired (A): DEFTERED TAK SCHEDULES Deductible Year Acct to date Tax to date acable) Temporary Difference 2018 2019 Jan. 1/20 2020 Dec 31/20 Deferred Tax Asset (Liability CCA Depreciation Date Dec. 11/20 Account Tide Debi GE DR/(CR) Year Acctg to date Tax to date Deductible/ (Taxable) Temporary Difference Rate Deferred Tax Asset/ (Uability) 2018 A Cover Sheet 01 2 DR/CR) Year Acct to date Tax to date Deductible Taxable) Temporary Difference Rate Deferred to Asset/ (Liability) Warranty 2018 2015 Jan 1/20 2020 Dec. 31/20 Account Title Date Dec 31/201 Debit GRE DR/(CR) Year Acctg to date Tax to date Deductible/ (Taxable) Temporary Difference Rate Deferred Tax Asset/ (Liability) 2018 EVE DR/(CR) Year Acctg to date Tax to date Deductible (Taxable) Temporary Difference Rate Deferred Taw Asset/ (Liability Advertising 2018 2019 Jan. 1/20 2020 Dec. 31/20 Account Time Det Cr Date Dec 31/201 DPRESENTATION DEFERRED TAXES M N 27 28 What accounts AND amounts would Patio Co. report on its December 31, 2020 financial statements associated with deferred income taxes ONLY? Complete the appropriate tables below. From the drop-down bcoces provided, select the appropriate account name and classification. Show debits as positive numbers and credits as negative numbers. 29 0 Statement of Profit/Loss Account name Amount ($) Statement of Financial Position Classification Account name Amount ($) 2 SPECIE for me 3 NOTE: THE QUESTION DATA HAS BEEN PRODUCED TWICE FOR EASE OF REFERENCE. ONCE ON THE CURRENT TAX TAB AND ONCE ON THIS TAB (DEFERRED TAX). THE DATA IS IDENTICAL ON EACH TAB. boxes 4 Patio Co. began operations in 2018 and follows IFRS. You, senior accountant of Patio Co., are working on the 2020 year's tax calculation and noted the following information: 7 8 (1). For the year-ended December 31, 2020, Patio Co. reported a $500,000 accounting income before income tax expense. This 10 amount includes a before tax loss from discontinued operations of 11 $50,000, of which only one-half is tax deductible. 12 9 9 The company began operations in 2018 and the following are (2) differences between accounting and taxable income: DR/(CR) 13 14 Item 2018 2019 2020 Reported on income statement: 15 16 Warranty 17 18 19 Estimated warranty expense Depreciation expense Non-deductible expenses Non-taxable income Advertising expense (see note 3) $18,000 $27,000 $43,000 48,000 48,000 48,000 2,000 5,000 8,000 5,000 8,000 6,700 37,500 DR / (CR) 20 21 22 Reported on tax return: 21 22 Reported on tax return: 23 Actual warranty costs incurred $15,000 $20,000 $50,000 24 Capital cost allowance 32,000 57,000 60,000 25 Advertising costs (see note 3) 75,000 26 (3). Patio Co. signed a two-year advertising service with the local radio station on January 1, 2020 for the period January 1, 2020 to December 31, 2021. The total fees of $75,000 were paid on January 27 1, 2020. 28 (4). The warranty covers all parts and labor for a one-year time period. (5). The tax rate for 2018 and 2019 was 30%. The tax rate for 2020 and future years is 25%. The new rate was enacted in November, 2020 and was unknown prior to that date. 9 future year's is 237. He new idle was endleu LT, LULU and was unknown prior to that date. dro 29 nu REQUIRED PART B: Deferred Income Taxes (15 marks) 30 31 (a). Prepare a schedule to calculate deferred income tax expense for the 32 year ended December 31, 2020 (located in columns 1 to 0); (b). Prepare the appropriate journal entries on December 31, 2020 33 (located in columns Q to T); AND (c). Prepare the appropriate financial statement presentation associated with deferred income taxes ONLY (to right Rows 31-33). 34 35 ITEM Required: DERRED TAXURRENTS Rate Hequired (A): DEFTERED TAK SCHEDULES Deductible Year Acct to date Tax to date acable) Temporary Difference 2018 2019 Jan. 1/20 2020 Dec 31/20 Deferred Tax Asset (Liability CCA Depreciation Date Dec. 11/20 Account Tide Debi GE DR/(CR) Year Acctg to date Tax to date Deductible/ (Taxable) Temporary Difference Rate Deferred Tax Asset/ (Uability) 2018 A Cover Sheet 01 2 DR/CR) Year Acct to date Tax to date Deductible Taxable) Temporary Difference Rate Deferred to Asset/ (Liability) Warranty 2018 2015 Jan 1/20 2020 Dec. 31/20 Account Title Date Dec 31/201 Debit GRE DR/(CR) Year Acctg to date Tax to date Deductible/ (Taxable) Temporary Difference Rate Deferred Tax Asset/ (Liability) 2018 EVE DR/(CR) Year Acctg to date Tax to date Deductible (Taxable) Temporary Difference Rate Deferred Taw Asset/ (Liability Advertising 2018 2019 Jan. 1/20 2020 Dec. 31/20 Account Time Det Cr Date Dec 31/201 DPRESENTATION DEFERRED TAXES M N 27 28 What accounts AND amounts would Patio Co. report on its December 31, 2020 financial statements associated with deferred income taxes ONLY? Complete the appropriate tables below. From the drop-down bcoces provided, select the appropriate account name and classification. Show debits as positive numbers and credits as negative numbers. 29 0 Statement of Profit/Loss Account name Amount ($) Statement of Financial Position Classification Account name Amount ($)