Question 2A: 26 Marks (45 Minutes) Phoenix Inc. is a publicly traded company located in Vancouver, Canada. They are in the process of finalizing its financial statement for year ended December 31, 2021. Phoenix's accounting income for 2021 was $ 458,000. Selected extracts from Phoenix's accounting and tax records are as follows: Balances as at December 31, 2020: Loss carryforward Net book value of equipment Provision for warranty Undepreciated capital cost of the equipment $ 180,000 875,000 89,000 482,000 Items included in determining 2021 accounting income: Cost of equipment sold Depreciation expense Dividend revenue from taxable Canadian corporations Interest on overdue accounts owing to the CRA Loss on sale of equipment Meals and entertainment expense Net book value of equipment sold Social club dues (not deductible for tax purposes) Warranty expense $ 160,000 98,000 7,000 1,000 17,000 6,000 89,000 4,000 26,000 Activities during 2021: Payment of warranty expense Purchase of new equipment Remittance of tax installments to the CRA $ 24,000 312.000 96,000 Other information: Capital cost allowance claimed in 2021 Development costs incurred $ 69,000 10,000 On May 1, 2021, the government enacted income tax rate increase from 30% to 32%, retroactively effective on January 1, 2021. Management estimates that it is more likely than not that the loss carryforward would be used. Required: (a) Phoenix reported a net deferred tax liability of $ 37,200 on its Statement of Financial Position (SFP) as at December 31, 2020. Show how this amount was determined. (3 Marks) (b) Calculate the current and deferred income tax that will appear on the Statement of Comprehensive Income for the year ended December 31, 2021. (19 Marks) (c) Prepare the journal entries to record the current and deferred income tax expense for 2021. (3 Marks) (d) Calculate the amount for the SFP accounts. (1 Mark) Question 2A: 26 Marks (45 Minutes) Phoenix Inc. is a publicly traded company located in Vancouver, Canada. They are in the process of finalizing its financial statement for year ended December 31, 2021. Phoenix's accounting income for 2021 was $ 458,000. Selected extracts from Phoenix's accounting and tax records are as follows: Balances as at December 31, 2020: Loss carryforward Net book value of equipment Provision for warranty Undepreciated capital cost of the equipment $ 180,000 875,000 89,000 482,000 Items included in determining 2021 accounting income: Cost of equipment sold Depreciation expense Dividend revenue from taxable Canadian corporations Interest on overdue accounts owing to the CRA Loss on sale of equipment Meals and entertainment expense Net book value of equipment sold Social club dues (not deductible for tax purposes) Warranty expense $ 160,000 98,000 7,000 1,000 17,000 6,000 89,000 4,000 26,000 Activities during 2021: Payment of warranty expense Purchase of new equipment Remittance of tax installments to the CRA $ 24,000 312.000 96,000 Other information: Capital cost allowance claimed in 2021 Development costs incurred $ 69,000 10,000 On May 1, 2021, the government enacted income tax rate increase from 30% to 32%, retroactively effective on January 1, 2021. Management estimates that it is more likely than not that the loss carryforward would be used. Required: (a) Phoenix reported a net deferred tax liability of $ 37,200 on its Statement of Financial Position (SFP) as at December 31, 2020. Show how this amount was determined. (3 Marks) (b) Calculate the current and deferred income tax that will appear on the Statement of Comprehensive Income for the year ended December 31, 2021. (19 Marks) (c) Prepare the journal entries to record the current and deferred income tax expense for 2021. (3 Marks) (d) Calculate the amount for the SFP accounts. (1 Mark)
