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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

  1. Prepare, in good form, all applicable tax entries for 2019. Show all supporting calculations.
  2. 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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