Question #3 (12 marks)

Delta Incorporated (DI) is a public company that started operations in 2020. It opened a number of locations across Canada. In fiscal 2020, DI had net income before tax of $390,000. The tax rate for 2020 was 25%. DI has a December 31 year-end. The following occurred during 2020.

1. DI purchased assets with an original cost of $780,000. The total depreciation for 2020 was $42,000. For tax purposes, DI had $12,000 CCA deducted.
2. For sales during 2020 DI recognized warranty expenses of $54,000. Actual warranty work completed during 2020 was $42,000.
3. DI contributed $12,000 to a local political campaign and expensed these costs during the year.
4. DI recognized revenues of $650,000 in 2020. Only $440,000 of these revenues were collected and taxed during the year. The remainder will not be taxed until they are due and collected next year.

Required:

1. Compute the taxable income and income tax payable in 2020. Show all supporting calculations. (5 marks)

	2020
Accounting Income:	$390,000
Taxable Income
Income tax payable

Question #3 (contd)

2. Prepare the journal entries to record income tax expense, deferred taxes and income tax payable in 2020 for DI. (5 marks)

	Debit	Credit

3. Assume instead that Delta company is a private company, using the taxes payable method of accounting for income tax. What is the total income tax expense for 2020? (2 marks)

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