Q3. (20 marks)

Sillow Corp. purchased equipment for $ 180,000 on January 2, 2020, its first day of operations. For book purposes, the equipment will be depreciated straight-line over three years with no residual value. Pre-tax accounting incomes and taxable incomes are as follows:

2020 2021 2022

Pre-tax accounting income $ 124,000 $ 140,000 $ 150,000

Taxable income 100,000 140,000 174,000

The reversible difference between pre-tax accounting income and taxable income is due solely to the use of CCA for tax purposes.

Instructions

Prepare the adjusting journal entries to record income taxes for all three years (expense, deferred tax assets/liabilities, etc.), assuming that the enacted income tax rate for all three years is 30%.

Prepare the adjusting journal entries to record income taxes for all three years (expense, deferred tax assets/liabilities, etc.), assuming that the enacted income tax rate for 2020 is 30% but that in the middle of 2021, Parliament raises the income tax rate to 35%, retroactive to the beginning of 2021.