Problem 1 (12 Marks)
Engage Ltd., at the end of 2023, its first year of operations, prepared a
reconciliation between pre-tax accounting income and taxable income as follows:
Pre-tax accounting income .................................................... $300,000
Excess CCA claimed for tax purposes .................................. (600,000)
Estimated expenses deductible when paid ............................ 500,000
Taxable income ..................................................................... $200,000
Use of the depreciable assets will result in taxable amounts of $200,000 in each of the next three years.
The estimated expenses of $500,000 will be deductible in 2026 when settlement is expected to be made.
The enacted tax rate is 25% and is to increase to 28%, starting in 2024.
Instructions:
a) Prepare a schedule of the deferred taxable and deductible amounts.
b) Prepare the required adjusting entries to record income taxes for 2023.