Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020:
Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020: Depreciation expense Capital cost allowance Warranty expense Warranty costs incurred $540,000 $690,000 $130,000 $155,000 Hostra entered into an equipment lease on January 2, 2020. The first lease payment of $135,000 was made on that date. The interest on the right-of-use asset was $24,000, and the depreciation expense was $75,000. (The depreciation expense on the right-of-use asset is included in the $540,000 depreciation expense above.). Hostra's deferred income tax liability at the beginning of 2020 was based on the following: a difference between the carrying value ($7,600,000) and undepreciated capital cost of property, plant, and equipment ($4,300,000) a warranty liability of $320,000 . . The tax rate for the year ended December 31, 2019, was 25%. The tax rate for the year ended December 31, 2020, was 26% (enacted on October 31, 2020), and the tax rate for the year ended December 31, 2021, is 30% (enacted on December 16, 2020). DCC Required: Calculate Hostra's deferred income tax expense for the year ended December 31, 2020. (7.5 marks) Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020: Depreciation expense Capital cost allowance Warranty expense Warranty costs incurred $540,000 $690,000 $130,000 $155,000 Hostra entered into an equipment lease on January 2, 2020. The first lease payment of $135,000 was made on that date. The interest on the right-of-use asset was $24,000, and the depreciation expense was $75,000. (The depreciation expense on the right-of-use asset is included in the $540,000 depreciation expense above.). Hostra's deferred income tax liability at the beginning of 2020 was based on the following: a difference between the carrying value ($7,600,000) and undepreciated capital cost of property, plant, and equipment ($4,300,000) a warranty liability of $320,000 . . The tax rate for the year ended December 31, 2019, was 25%. The tax rate for the year ended December 31, 2020, was 26% (enacted on October 31, 2020), and the tax rate for the year ended December 31, 2021, is 30% (enacted on December 16, 2020). DCC Required: Calculate Hostra's deferred income tax expense for the year ended December 31, 2020. (7.5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started