Q1. (20 marks)

Gursol Exchange Inc., is arriving at the financial statement disclosures for the 2020 financial statement note on income taxes. The company uses ASPE, and follows the taxes payable method. The statutory tax rate is currently 25%. During 2020, income before tax was $ 170,000. CCA exceeded depreciation expense by $ 45,000. Gursol paid interest on late and deficient tax instalments of $ 18,000 during 2020.

Instructions

1. Determine the income tax expense to be recorded using the taxes payable method and record the necessary journal entry.

2. Prepare the reconciliation of actual tax rate to the statutory rate as required for inclusion in the financial statement note on income taxes. Round tax rates to one decimal place.