P18-6
P18-6 The accounting records of Steven Corp., a real estate developer, indicated income before income tax of 850,000 for its year ended December 31, 2017, and of S525,000 for the year ended December 31, 2018. The following data are also available. 1. Steven Corp pays an annual life insurance premium of S11,000 covering the top management team. The company is the named beneficiary. 2. The carrying amount of the company's property, plant, and equipment at January 1, 2017 was $1,256,000, and the UCC at that date was $998,000. Steven recorded depreciation expense of $175,000 and $180,000 in 2017 and 2018, respectively. CCA for tax purposes was $192,000 and S163,500 for 2017 and 2018, respectively. There were no asset additions or disposals over the two-year period. 3. Steven deducted $211,000 as a restructuring charge in determining income for 2016. At December 31, 2016, an accrued liability of $199,500 remained outstanding relative to the restructuring, which was expected to be com- are incurred and paid for. The actual restructuring of operations took place in 2017 and 2018, with the liability reduced to pleted in the next fiscal year. This expense is deductible for tax purposes, but only as the actual costs S68,000 at the end of 2017 and to $0 at the end of 2018. 4. In 2017, property held for development was sold and a profit of S$2,000 was recognized in income. Because the sale was made with delayed payment terms, the profit is taxable only as Steven receives payments from the pur- chaser. A 10% down payment was received in 2017, with the remaining 90% expected in equal amounts over the following three years S. Non-taxable dividends of $3,250 in 2017 and of S3,500 in 2018 were received from taxable Canadian corporations. 6. In addition to the income before income tax identified above, Steven reported a before-tax gain on discontinued operations of $18,800 in 2017 7. A 30% rate of tax has been in effect since 2015. Steven Corp. follows IFRS. (a) Determine the balance of any deferred tax asset or liability accounts at December 31, 2016, 2017, and 2018. (b) Determine 2017 and 2018 taxable income and current tax expense. (c) Prepare the journal entries to record current and deferred tax expense for 2017 and 2018. (d) Identify how the Deferred Tix Asset or Deferred Tax Liability account(s) will be reported on the December 31 2017 and 2018 statements of financial position. (e) Prepare partial income statements for the years ended December 31, 2017 and 2018, beginning with the line Income from continuing operations before income tax. ( How would your response to parts (a) to (e) change if Steven Corp. reported under ASPE? P18-7 Andrew Weiman and Mei Lee are discussing accounting for income taxes. They are currently studying a schedule of taxable and deductible amounts that will arise in the future as a result of existing temporary differences. The chedule applies to a company that reports under the ASPE future/deferred income taxes method. The schedule is as follows
