Question 2 Taxes (11.5 marks)

Thank you again for previously calculating DBT Incs tax return last month, however due to a significant amount of adjustments we require your help once again. Please see the information below and our requirements.

D.B.T. Inc
Income Statement
For the Year Ended December 31, 2021
Revenue
	Service Revenue	880,000
	Dividend Revenue	50,000
	Life Insurance Claim Received	95,000
Total Revenue			1,025,000
Expenses
	Depreciation Expense	100,000
	Office Expense	25,000
	Meals and Entertainment Expense	15,000
	Advertising Expense	20,000
	Rent Expense	40,000
	Litigation Expense	30,000
	Life Insurance Premiums Paid	8,500
	Salary & Wage Expense	307,000
	Warranty Expense	50,000
Total Expenses			595,500
Income from Operations			429,500

Additional Information:

1.		DBT uses IFRS. It has an income tax rate of 25%. The dividend revenue represents dividends received from Canadian corporations (non-taxable).
2.		During the year warranty expense of $50,000 was recorded. $10,000 of this amount was paid in cash during 2021. This is the first year DBT offers warranties on services rendered.
3.		Property, plant, and equipment was purchased for $700,000 on January 1, 2020. These assets are being depreciated on a straight-line basis over seven years with no residual value. For tax purposes the assets are classified as Class 8, 20%. This PPE is considered eligible equipment for purposes of the Accelerated Investment Incentive (the AII) (under the AII, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate). This rate was used for 2020.
4.		DBT pays for life insurance policies for its top executives. During 2021, one of the executives died, and the company received a payment of $95,000 from the life insurance company.
5.		On July 1, DBT was sued by a competitor. Although the lawsuit has not been finalized, management believes that it is probable that a settlement will eventually be reached for $30,000.
6.		On November 15, $35,000 was received from a customer for three months of service, beginning on November 15. One half of this amount was earned and included in revenue for 2021. Advance payments are included in taxable income when the cash is received.
7.		On December 1, one of the company executives received a speeding ticket for $200. The company paid the ticket for the executive and recorded the cost as an office expense.

Required:

1. Calculate taxable income and taxes payable for 2021 (show all calculations including the schedule) (9 marks).

2. Prepare the journal entries to record 2021 income taxes (current and deferred) (Hint: Remember to record the change for DTA/DTL) (2.5 marks).