Problem 18-1 Sarasota Ltd. began business on January 1, 2016. At December 31, 2016, it had a $4,725 balance in the Deferred Tax Liability account that pertains to property, plant, and equipment a Class 8 ac asset for tax purposes, Sarasota's income before income tax for 2017 was $62.000. Sarasota l td. follows IERS and the balf-vear convention for depreciation ses, and i The following items caused the only differences between accounting income before income tax and taxable income in 2017. In 2017 full 55 aid $55,00 of this amount, 18,500 was expensed i was deducted for tax purposes in 2017 2017. The other $37,000 will be expensed equally over the 2018 and 2019 accounting 1. periods Sarasota Ltd. pays $8,500 a year for a membership in a local golf club for the company's president 2. Sarasota Ltd. now offers a one-year warranty on all its merchandise sold. Warranty expenses for 2017 were $8,700. Cash payments 2017 for warranty repairs were $4,350 3 Meals and entertainment expenses (only 50% of which are ever tax deductible) were $11,500 for 2017. The maximum allowable CCA was taken in 2017. There were no asset disposals for 2017. 4 5. Income tax rates have not changed since the company began operations. Calculate the balance in the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Balance in deferred tax account Calculate income tax pavable for 2017. Income Tax Payable Prepare the jod e Entry" o title ter a for the. is require automatically indented when the amount is entered. Do not indent manually f no entry ounts.) se Credit Account Titles and Explanation Debit Date December 31, 2017 (To record current taxes.) December 31, 2017 (To record deferred taxes.) Prepare the income tax expense section of the income statement for 2017, beginning with the line "Income before income tax." (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sarasota Ltd. (Partial) Income Statement Indicate how deferred taxes should be presented on the December 31, 2017 statement of financial position. Sarasota Ltd. (Partial) Statement of Financial Position Indicate how deferred taxes should be presented on the December 31, 2017 balance sheet if Sarasota reported under ASPE. Sarasota Ltd. (Partial) Balance Sheet Problem 18-1 Sarasota Ltd. began business on January 1, 2016. At December 31, 2016, it had a $4,725 balance in the Deferred Tax Liability account that pertains to property, plant, and equipment a Class 8 ac asset for tax purposes, Sarasota's income before income tax for 2017 was $62.000. Sarasota l td. follows IERS and the balf-vear convention for depreciation ses, and i The following items caused the only differences between accounting income before income tax and taxable income in 2017. In 2017 full 55 aid $55,00 of this amount, 18,500 was expensed i was deducted for tax purposes in 2017 2017. The other $37,000 will be expensed equally over the 2018 and 2019 accounting 1. periods Sarasota Ltd. pays $8,500 a year for a membership in a local golf club for the company's president 2. Sarasota Ltd. now offers a one-year warranty on all its merchandise sold. Warranty expenses for 2017 were $8,700. Cash payments 2017 for warranty repairs were $4,350 3 Meals and entertainment expenses (only 50% of which are ever tax deductible) were $11,500 for 2017. The maximum allowable CCA was taken in 2017. There were no asset disposals for 2017. 4 5. Income tax rates have not changed since the company began operations. Calculate the balance in the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Balance in deferred tax account Calculate income tax pavable for 2017. Income Tax Payable Prepare the jod e Entry" o title ter a for the. is require automatically indented when the amount is entered. Do not indent manually f no entry ounts.) se Credit Account Titles and Explanation Debit Date December 31, 2017 (To record current taxes.) December 31, 2017 (To record deferred taxes.) Prepare the income tax expense section of the income statement for 2017, beginning with the line "Income before income tax." (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sarasota Ltd. (Partial) Income Statement Indicate how deferred taxes should be presented on the December 31, 2017 statement of financial position. Sarasota Ltd. (Partial) Statement of Financial Position Indicate how deferred taxes should be presented on the December 31, 2017 balance sheet if Sarasota reported under ASPE. Sarasota Ltd. (Partial) Balance Sheet
