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P18.1 Anthony Ltd. began business on January 1, 2019. At December 31, 2019, it had a $58,500 balance in the Deferred Tax Liability account that

P18.1 Anthony Ltd. began business on January 1, 2019. At December 31, 2019, it had a $58,500 balance in the Deferred Tax Liability account that pertains to property, plant, and equipment acquired on July 1, 2019 at a cost of $900,000. The property, plant, and equipment is being depreciated on a straight-line basis over six years for financial reporting purposes, and is a Class 820% asset for tax purposes. Anthony's income before income tax for 2020 was $60,000. Anthony Ltd. follows IFRS.

The following items caused the only differences between accounting income before income tax and taxable income in 2020.

  1. In 2020, the company paid $56,250 for rent; of this amount, $18,750 was expensed in 2020. The other $37,500 will be expensed equally over the 2021 and 2022 accounting periods. The full $56,250 was deducted for tax purposes in 2020.
  2. Anthony Ltd. pays $9,000 a year for a membership in a local golf club for the company's president.
  3. Anthony Ltd. now offers a one-year warranty on all its merchandise sold. Warranty expenses for 2020 were $9,000. Cash payments in 2020 for warranty repairs were $4,500.
  4. Meals and entertainment expenses (only 50% of which are ever tax deductible) were $12,000 for 2020.
  5. The maximum allowable CCA was taken in 2020. There were no asset disposals for 2020. Assume the PPE is considered eligible equipment for purposes of the Accelerated Investment Incentive (under the AII, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate).

Income tax rates have not changed since the company began operations.

Instructions

a. Calculate the balance in the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2020.

b. Calculate income tax payable for 2020.

c. Prepare the journal entries to record income taxes for 2020.

d. Prepare the income tax expense section of the income statement for 2020, beginning with the line Income before income tax.

e. Indicate how deferred taxes should be presented on the December 31, 2020 SFP.

f. How would your response to parts (a) to (e) change if Anthony reported under ASPE?

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