Question 1 (10 marks) Leonard Inc.'s controller, has asked for help in determining the future tax position of the company at December 31, 2 2020. The controller has provided you with the following information: 1. Net income for accounting purposes before taxes was $ 325,000. 2. There was an unknown balance in Deferred Tax Liability account, January 1, 2020. 3. Warranty expense for the 2020 year was $50,000. The actual amount paid to service warranties was $40,000. The balance in the accrued warranty liability account at December 31, 2019 was $25,000. 4. The opening tax value of the companies' buildings was $500,000. The opening accounting value of these buildings was $1 million. The accounting depreciation for 2020 was $100,000, while capital cost allowance (CCA) was $35,000 5. The company had a membership in the Alberta Hunt and Golf Club. Annual membership fees reported as an expense for accounting purposes were $25,000. This amount was not deductible for tax purposes. 6. Leonard Inc. had a tax loss carry forward amount that was available for use to reduce taxable income in 2020. The amount of the loss was $150,000. The benefit of this loss had never been realized as it was unlikely that the benefit would be realized. 7. Assume that Leonard Inc. follows IFRS. 8. The tax rate for 2019 was 40%; for 2020, it was 42%. Hint: Don't forget to include the 2019 Deferred Tax Asset/Liability account balances when calculating your 2020 balances. Required: a) Determine the entries necessary to record current and future income taxes for the 2020 year. b) Explain how the future income tax asset/liability would be presented on the classified statement of financial position under IFRS. Question 1 (10 marks) Leonard Inc.'s controller, has asked for help in determining the future tax position of the company at December 31, 2 2020. The controller has provided you with the following information: 1. Net income for accounting purposes before taxes was $ 325,000. 2. There was an unknown balance in Deferred Tax Liability account, January 1, 2020. 3. Warranty expense for the 2020 year was $50,000. The actual amount paid to service warranties was $40,000. The balance in the accrued warranty liability account at December 31, 2019 was $25,000. 4. The opening tax value of the companies' buildings was $500,000. The opening accounting value of these buildings was $1 million. The accounting depreciation for 2020 was $100,000, while capital cost allowance (CCA) was $35,000 5. The company had a membership in the Alberta Hunt and Golf Club. Annual membership fees reported as an expense for accounting purposes were $25,000. This amount was not deductible for tax purposes. 6. Leonard Inc. had a tax loss carry forward amount that was available for use to reduce taxable income in 2020. The amount of the loss was $150,000. The benefit of this loss had never been realized as it was unlikely that the benefit would be realized. 7. Assume that Leonard Inc. follows IFRS. 8. The tax rate for 2019 was 40%; for 2020, it was 42%. Hint: Don't forget to include the 2019 Deferred Tax Asset/Liability account balances when calculating your 2020 balances. Required: a) Determine the entries necessary to record current and future income taxes for the 2020 year. b) Explain how the future income tax asset/liability would be presented on the classified statement of financial position under IFRS
