Goofy lndustries, Inc., [GI] manufactures pilotless airplanes and reported an accounting income before income taxes was $625,000 for the year ended December 31, 2019. Additional information pertaining to income taxes is as follows:

The net book value of its capital assets, i.e., the carrying amount at January 1, 2019, was $1,256,000, and at January 1, 2020, was $1,276,000.Depreciation expense in 2019 on capital assets was $287,000. Similarly, the undepreciated capital cost balance (UCC tax basis) was $856,000 on January 1, 2019 and $768,000 on January 1, 2020.

GIhad a balance of $79,000 as warranty liability on January 1, 2019 and $56,000 on January 1, 2020. Warranty claims paid out for the year were $45,000.

In 2018, a plane was sold and a profit of $26,000 was recognized in accounting income. Because the sale was made with delayed payment terms, the profit is taxable only as GI receives payments from the purchaser. A $2,000 profit on the down payment was received in 2018, with the balance expected to be received in equal amounts over the following three years.

Life insurance premiums on the lives of theGI's chief executive officer paid by the company were $12,000. This expense is not deductible for tax purposes.

Dividends of $5,000 received during the year from a Canadian corporation were non-taxable.

Golf club membership dues paid for company executives amounted to $20,000. This expense is not deductible for tax purposes.

In 2018, the government changed the income tax rate from 35% to 40%, effective January 1, 2019.

REQUIRED: Select the alphabet of the one best answer to each of the questions listed below and input it in the computer.

[37]Determine the net change to be made to the Deferred Tax Asset/Liability account for the adjustment of the capital cost allowance in 2019.

Select one:

a.

A DEBIT to Deferred Tax Asset/Liability, $1,251,000.

b.

A CREDIT to Deferred Tax Asset/Liability $1,251,000 .

c.

A CREDIT to Deferred Tax Asset/Liability, $63,200.

d.

A DEBIT to Deferred Tax Asset/Liability, $108,000.

e.

A CREDIT to Deferred Tax Asset/Liability, $43,200.

[38]What change, other than for the depreciation claimed, occurred to the company's total capital assets during 2019?

Select one:

a.

A net increase probably due to the acquisition of additional assets costing $20,000 during the year.

b.

A net increase of $20,000 probably due to the sale of assets for cash during the year.

c.

A net increase probably due to the sale of assets for cash with a profit of $20,000 during the year.

d.

A net increase probably due to the acquisition of additional assets costing $307,000 during the year.

e.

There was no other change.

[39]Determine the change to be made to the Deferred Tax Asset/Liability account for the net adjustment ofwarranty expenses/claims in 2019.

Select one:

a.

A DEBIT to Deferred Tax Asset/Liability, $31,600.

b.

A CREDIT to Deferred Tax Asset/Liability, $22,400.

c.

A CREDIT to Deferred Tax Asset/Liability, $19,600.

d.

A CREDIT to Deferred Tax Asset/Liability $9,200.

e.

A CREDIT to Deferred Tax Asset/Liability, $5,250.

[40]The entry required to be made to the Deferred Tax Asset/Liability account for the net adjustment of the installment sales in 2019 would be

Select one:

a.

A DEBIT to Deferred Tax Asset/Liability, $8,000;

b.

A CREDIT to Deferred Tax Asset/Liability $24,000.

c.

A DEBIT to Deferred Tax Asset/Liability $2,800;

d.

A CREDIT to Deferred Tax Asset/Liability $8,050.

e.

A DEBIT to Deferred Tax Asset/Liability, $3,200.

[41]Assume that GI decides to make the following entry on December 31, 2019.

DRCurrent income tax expense$211,600

CRIncome tax payable$211,600

This would imply that

Select one:

a.

the taxable income for 2019 was different than the accounting income.

b.

the income tax expense reported by GI on its income statement would be $250,000.

c.

the taxable income for 2019 was determined to be $529,000.

d.

All of the above.

e.

None of the above.

42]Assume forQuestions[42]and[43]only that on December 31, 2019,GIcarried balances in the following three accounts as stated below:

Capital Assets$768,000 [UCC Balance $1,276,000]; reversible over the next 10 years;

Warranty Liability$ 79,000 reversible when the liability is settled.

Installment Sales$ 16,000 reversible equally over the next two years.

If GI operates underASPE, how would the Deferred Tax Asset/Liability be reported?

Select one:

a.

$203,200 as a Long Term Liability; $31,600 as a Current Asset; and $6,400 as a Current Liability.

b.

$203,200 as a Long Term Asset; $31,600 as a Current Asset; and $6,400 as a Current Liability.

c.

$200,000 as a Long Term Asset; $28,400 as a Current Asset.

d.

$178,000 as a Long Term Liability.

e.

Cannot be determined from the given data.

43]If GI reported underIFRS, how would the Deferred Tax Asset/Liability be reported?

Select one:

a.

$203,200 as a Long Term Liability; $31,600 as a Current Asset; and $6,400 as a Current Liability.

b.

$203,200 as a Long Term Asset; $31,600 as a Current Asset; and $6,400 as a Current Liability.

c.

$203,200 as a Long Term Liability; $25,200 as a Current Asset.

d.

$228,400 as a Long Term Asset.

e.

Cannot be determined from the given data.