Part A (5 marks) Listed below are items that are treated differently for accounting purposes than they are for tax purposes Indicate whether the items are permanent differences or reversible differences For reversible differences , indicate whether they will create deferred tax assets or deferred tax liabilities Item Permanent differences or reversible differences indicate whether deferred tax assets or deferred tax liabilities created Investments accounted for by the equity method Rent collected in advance Membership costs for executives at a local golf club Part B (17 Marks) In 2019, its first year of operations, Omega Corporation, a public corporation using IFRS, reported the following information Income before income taxes was $2,200,000 The company acquired capital assets costing $3,600,000 depreciation was $240,000 and CCA was $180,000 The company recorded an expense of $500,000 for the one year warranty on the companys products cash disbursements amounted to $380,000 The company incurred development costs of $200,000 that were capitalized Development work was still ongoing at year end and no amortisation was deducted (For tax purposes, development costs are deducted when incurred ) The company made a political contribution of $20,000 to a local politician Golf club memberships for top executives cost $40,000 The income tax rate was 38 Question 5 (contd) Required 1 Calculate taxable income for 2019 Show the adjustments necessary by completing table below (6 marks) 2019 Accounting Income Taxable Income 2 Prepare the journal entries to record income tax expense, deferred taxes and income tax payable in 2019 for Omega Corporation (6 marks) 2019 Debit Credit Question 5 (contd) Compute Omegas effective tax rate (to two places of decimal) in 2019 (2 marks) Assume that in 2020, Omegas second year of operations, depreciation was $240,000 and CCA was $342,000 on capital assets and legislation was enacted that changed the tax rate to 40 Calculate the balance in the deferred tax asset liability related to capital assets at the end of 2020, indicating whether it is a deferred tax asset or liability (3 marks)

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Part A. (5 marks) Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items

Part A. (5 marks) Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences or reversible differences. For reversible differences, indicate whether they will create deferred tax assets or deferred tax liabilities.

Item	Permanent differences or reversible differences & indicate whether deferred tax assets or deferred tax liabilities created
Investments accounted for by the equity method
Rent collected in advance
Membership costs for executives at a local golf club

Part B. (17 Marks)

In 2019, its first year of operations, Omega Corporation, a public corporation using IFRS, reported the following information:

Income before income taxes was $2,200,000.
The company acquired capital assets costing $3,600,000; depreciation was $240,000 and CCA was $180,000.
The company recorded an expense of $500,000 for the one-year warranty on the companys products; cash disbursements amounted to $380,000.
The company incurred development costs of $200,000 that were capitalized. Development work was still ongoing at year-end and no amortisation was deducted. (For tax purposes, development costs are deducted when incurred.)
The company made a political contribution of $20,000 to a local politician.
Golf club memberships for top executives cost $40,000.
The income tax rate was 38%.

Question # 5 (contd)

Required: 1. Calculate taxable income for 2019. Show the adjustments necessary by completing table below. (6 marks)

	2019
Accounting Income:









Taxable Income

2. Prepare the journal entries to record income tax expense, deferred taxes and income tax payable in 2019 for Omega Corporation. (6 marks)

2019:	Debit	Credit

Question #5 (contd)

Compute Omegas effective tax rate (to two places of decimal) in 2019 ? (2 marks)

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Assume that in 2020, Omegas second year of operations, depreciation was $240,000 and CCA was $342,000 on capital assets and legislation was enacted that changed the tax rate to 40%. Calculate the balance in the deferred tax asset/liability related to capital assets at the end of 2020, indicating whether it is a deferred tax asset or liability. (3 marks)