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Indigo Limited, a December 31 year-end publically traded company, reported income from continuing operations before taxes of $175,900 and pre-tax OCI of $26,000 in 2019.
Indigo Limited, a December 31 year-end publically traded company, reported income from continuing operations before taxes of $175,900 and pre-tax OCI of $26,000 in 2019. The OCI was entirely attributable to investment portfolio adjustments applied under the FV-OCI model. Indigo's statutory tax rate for 2019 is 36%. On January 25, 2020, while the 2019 financial statements were still under audit, the statutory rate increased to 38% for the foreseeable future. At the end of 2018, selected amounts from the general ledger reported: net book value of depreciable assets of $795,000, Undepreciated Capital Cost of $950,000 estimated warranty liability of $49,000, . a deferred tax balance arising from the capital assets of $54,250 Tax loss carry-forward at the end of 2018 of $80,000. At that time management was conservative and recognized only 1 of any related tax benefit in the 2018 financial statements. For 2019: dividends received from taxable Canadian corporations amounted to $16,000 meals and entertainment expenses totaled $60,000 CCA allowance claimed was $50,000 and related depreciation expense was $63,000. There were no asset additions this year. warranty expenses of $71,400 equaled the amount of warranty claims paid Indigo applies all loss carry-forward available to reduce current year's taxable income Requirement #1: Prepare, in good form, all applicable tax entries for 2019. Show all supporting calculations. Current Year Income Tax Reconciliation here (tax entries follow where indicated) Deferred tax analysis here (tax entries follow where indicated) Item Tax GAAP Balance 31/12/19 Adjust Ending DTA/DTL Temp. Diff FT/FD Begin DTA/DTL "Balance' 13/12/19 All tax entries from the above analyses here: Requirement #2: Prepare, in good form, the partial income statement beginning with... "income before taxes..." for the year ended December 31, 2019. Statement heading is not required
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