Novak Inc. follows IFRS. Novak holds a variety of investments, some of which are accounted for at fair value through net income and some of which are accounted for at fair value through other comprehensive income. On January 1, 2020, the beginning of the fiscal year, Novak's accounts and records include the following information: Cost $ 65,000 Fair value through net income investments Fair value through other comprehensive income investments Market Value $ 65,000 74,000 74.000 Market values for the FV-Nl investments and FV-OCl investments at December 31, 2020, were $ 62,800 and $ 78,800, respectively. Computers that are used to track investment performance were purchased during 2020 for $ 16,000. For tax purposes, assume the computers are in Class 10 with a CCA rate of 30% (assume the Accelerated Investment Incentive applies to these computers). Depreciation expense for the year was $ 3,200. Novak recorded meals and entertainment expenses of $ 24,400 related to "wining and dining" clients. The CRA allows 50% of these costs as a deductible business expense. Novak's income before income tax for 2020 is $ 124,000. This amount does not include any entries to adjust investments to market values at December 31, 2020. Novak's tax rate for 2020 is 25%, although changes enacted in tax legislation before December 31, 2020 will result in an increase in this rate to 30% for 2021 and subsequent taxation years. Assume that these rates apply to all income that is reported. There were no deferred tax accounts at January 1, 2020. Your answer is partially correct. Prepare journal entries to reflect the difference between the carrying amount and market value for the above investments at Novak's year end of December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit Date December 31, 2020 (To record fair value adjustment for FV-Nl investments) December 31, 2020 FV-OCI Investments 4800 4800 (To record fair value adjustment for FV-OCI investments) e Textbook and Media List of Accounts Calculate the deferred tax asset or liability balances at December 31, 2020 Deferred tax llability e Textbook and Media List of Accounts Your answer is incorrect. Calculate taxable income and income tax payable for 2020. Taxable income S Income tax payable S e Textbook and Media List of Accounts Your answer is partially correct. Prepare the journal entries to record income taxes for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Year Account Titles and Explanation Debit Credit 2020 Current Tex Evans (To record current tax expense) 2020 Deferred Tex Expense (To record deferred tax expense) 2020 (To record deferred tax expense for OCl investments) e Textbook and Media List of Accounts Novak Inc. follows IFRS. Novak holds a variety of investments, some of which are accounted for at fair value through net income and some of which are accounted for at fair value through other comprehensive income. On January 1, 2020, the beginning of the fiscal year, Novak's accounts and records include the following information: Cost $ 65,000 Fair value through net income investments Fair value through other comprehensive income investments Market Value $ 65,000 74,000 74.000 Market values for the FV-Nl investments and FV-OCl investments at December 31, 2020, were $ 62,800 and $ 78,800, respectively. Computers that are used to track investment performance were purchased during 2020 for $ 16,000. For tax purposes, assume the computers are in Class 10 with a CCA rate of 30% (assume the Accelerated Investment Incentive applies to these computers). Depreciation expense for the year was $ 3,200. Novak recorded meals and entertainment expenses of $ 24,400 related to "wining and dining" clients. The CRA allows 50% of these costs as a deductible business expense. Novak's income before income tax for 2020 is $ 124,000. This amount does not include any entries to adjust investments to market values at December 31, 2020. Novak's tax rate for 2020 is 25%, although changes enacted in tax legislation before December 31, 2020 will result in an increase in this rate to 30% for 2021 and subsequent taxation years. Assume that these rates apply to all income that is reported. There were no deferred tax accounts at January 1, 2020. Your answer is partially correct. Prepare journal entries to reflect the difference between the carrying amount and market value for the above investments at Novak's year end of December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit Date December 31, 2020 (To record fair value adjustment for FV-Nl investments) December 31, 2020 FV-OCI Investments 4800 4800 (To record fair value adjustment for FV-OCI investments) e Textbook and Media List of Accounts Calculate the deferred tax asset or liability balances at December 31, 2020 Deferred tax llability e Textbook and Media List of Accounts Your answer is incorrect. Calculate taxable income and income tax payable for 2020. Taxable income S Income tax payable S e Textbook and Media List of Accounts Your answer is partially correct. Prepare the journal entries to record income taxes for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Year Account Titles and Explanation Debit Credit 2020 Current Tex Evans (To record current tax expense) 2020 Deferred Tex Expense (To record deferred tax expense) 2020 (To record deferred tax expense for OCl investments) e Textbook and Media List of Accounts
