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Jaunty Ltd. began operations on January 1, 2020. Jaunty purchased equipment on January 1, valued at $430,000. On December 31, 2020, Jaunty reported income before
Jaunty Ltd. began operations on January 1, 2020. Jaunty purchased equipment on January 1, valued at $430,000. On December 31, 2020, Jaunty reported income before taxes of $60,000. Included in income before taxes are the following items:
- Meals of $7,000
- Dividend income of $1,800 from another Canadian corporation
- Warranty expenses of $8,000
- Penalties on late payment of taxes of $750
- Depreciation of $23,000
For tax purposes, Jaunty is able to claim $38,000 of CCA on its equipment for the year. After reviewing its accounts, Jaunty determined that it paid $3,000 in warranty costs for the year.
Jauntys tax rate for 2020 is 28%.
Required:
- Calculate Jauntys taxable income for 2020.
- Prepare the journal entry to recognize the current taxes for 2020.
- Assuming that Jaunty follows IFRS, determine the amount of deferred taxes for 2020 and prepare the necessary adjusting journal entry.
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