Question
Investment Limited, a December 31 year-end publically traded company, reported income from continuing operations before taxes of $175,900 and pre-tax OCI of $36,000 in 2019.
Investment Limited, a December 31 year-end publically traded company, reported income from continuing operations before taxes of $175,900 and pre-tax OCI of $36,000 in 2019. The OCI was entirely attributable to investment portfolio adjustments applied under the FV-OCI model. Indigos statutory tax rate for 2019 is 37% and this statutory tax rate increases to 38% for all subsequent years (after 2019).
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
- Prepaid rent expense of $49,000 for extra needed office space
- a deferred tax balance arising from prepaid rent expenses of $17,150
- The company reported/recognized a deferred tax amount of $14,000 arising from a loss carryforward at the end of 2018. At that time management was conservative and recognized only of the eligible loss carryforward.
For 2019:
- dividends received from taxable Canadian corporations amounted to $7,000
- 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.
- The company expensed $9,000 of the prepaid rent
- Investment Limited applies all loss carry-forward available to reduce current years taxable income
- Prepare, in good form, all applicable tax entries for 2019. Show all supporting calculations.
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Prepare, in good form, the partial income statement beginning with income before taxes for the year ended December 31, 2019. A statement header is not required.
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