Question 2

You are the tax accountant over at Anounou Inc. They are a listed on the TSX. We are on January 5th, 2020 and you are tasked to calculate and book the tax accounting entries for the year ended December 31, 2019.

A) Your boss, the tax manager, provides you with the following information to get you started with your task:

1. In 2019, the business claimed 500,000 more depreciation than CCA.

2. At the end of December 2019, Anounou's substantively enacted tax rate for 2019 and future years was changed to 33%.

3. Through a detailed forecasting exercise led by the Finance department, it was determined that is probable that a 50% of any loss carry forward at the end of 2019 will be realized.

4. If there are any tax losses, the manager would like to refile any prior tax returns to get money from the CRA before carrying forward any potential remaining balance.

5. Your boss reminds you that any accounting accruals you encounter on the books of Anounou Inc. are only deductible when they are paid for tax purposes.

B) In looking in the prior year file, you can see the following information:

1. On December 31, 2018, Undepreciated costs of capital was $15,000,000 and net book value of $13,500,000. There were no Fixed Assets prior to 2018.

2. Anounou didnt have any taxable income, nor did it pay taxes in 2015 and 2016. In 2018 however, Anounou had cumulative, total taxable income of $1,350,000.

3. The tax rate for 2018 was 19%

C) You find the following information in the accounting records for 2019:

1. For the year ended December 31, 2019, Anounou's accounting loss before tax was

$10,000,000.

2. A new pension plan was introduced in the year and expenses were $13,000 while payments were $12,000 for the year.

3. In 2019, estimated losses of $407,000 on pending lawsuits were accrued for accounting purposes. No payments were made against these lawsuits.

4. Business meals and entertainment were $12,000. (They are one-half deductible for tax purposes.)

5. During 2019, the company booked estimated warranty costs of 12,000 and these costs are not likely to be paid until 2021.

6. In 2019, the company incurred $11,000 of non-deductible life insurance premiums and

$10,000 of non-deductible fees for non-payment of income taxes.

Required

A. Prepare the journal entries to record income taxes for the year ended December 31, 2019 by calculating taxable income and the deferred (future) tax continuity schedules

B. Prepare the partial income statement and balance sheet