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E1817 (Reversing and Permanent Differences, Future Taxable Amount, No Beginning Future Taxes) Christina Inc. follows IFRS and accounts for financial instruments based on lFRS 9.

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E1817 (Reversing and Permanent Differences, Future Taxable Amount, No Beginning Future Taxes) Christina Inc. follows IFRS and accounts for financial instruments based on lFRS 9. Christina holds a variety of investments, some of which are accounted for at fair value through net income and some of which are accounted for at fair value through other comprehensive income. On January 1, 2011, the beginning of the fiscal year, Christina's accounts and records include the following information: Cost Market Value Fair value through net income investments $60,000 $60,000 Fair value through other comprehensive income investments 71,000 71,000 Market values for the FVNI investments and FVOCI investments at December 31, 2011, were $58,000 and $75,000, respectively. Computers that are used to track investment performance were purchased during 2011 for $10,000. For tax purposes, assume the computers are in Class 10 with a CCA rate of 30%. Depreciation expense for the year was $2,000. Christina recorded meals and entertainment expenses of $24,000 related to wining and dining clients. The CRA allows 50% of these costs as deductible business expense. Christina's income before income taxes for 2011 is $110,000. This amount does not include any entries to adjust investments to market values at December 31, 2011. Christina's tax rate for 2011 is 40%, although changes enacted in tax legislation before December 31, 2011, result in an increase in this rate to 45% for 2012 and subsequent taxation years. Assume that these rates apply to all income that is reported. There were no future tax accounts at January 1, 2011. Instructions (a) Prepare journal entries to reect the difference between the carrying amount and market value for the above invest ments at Christina's year end of December 31, 2011. (b) Explain the tax treatment that should be given to the unrealized accrued gains or losses reported on Christina's state ment of income and statement of comprehensive income. (c) Calculate the future income tax asset or liability balances at December 31, 2011, and indicate their classification. (d) Calculate taxable income and income taxes payable for 2011. (e) Prepare the journal entries to record income taxes for 2011

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