Spring Prep Limited (Spring) began its landscaping business in 2021 and in that year recorded an operating loss for income tax purposes. On Spring's December 31, 2021 statement of financial position, the company reported a future tax asset of $13,500 related to this loss which the company is carrying forward into 2022. The company also reported a future tax liability of $5,400 from having claimed capital cost allowance (CCA) in excess of book depreciation in that year Spring's income tax rate for 2021 was 30%.

In its second year of operations the company reported Accounting income of $105,000 for the year ended December 31, 2022. Also for 2022, the following items caused taxable income to be different than income reported on Spring's financial statements: Depreciation expense was $15,000 less than capital cost allowance claimed on the company's tax return Warranty expense was reported at $4,000 while actual cash paid for warranty work was $2,500. This reversing difference will cause deductible amounts of $1,500 in 2020. Meal and entertainment expenses for the year were $8,000. Only 50% of these expenses are deductible for tax purposes. During the year Spring received $3,500 of dividends from a taxable Canadian corporation. These dividends are not subject to income tax. In late December, 2022 the government decreased the income tax rate to 25% effective immediately for 2022 and all years thereafter. Spring has decided they will utilize in 2022, the 2021 loss being carried forward, in order to reduce the company's 2022 income taxes.

Required:

(SHOW ALL SUPPORTING CALCULATIONS) Calculate Spring's taxable income, current income tax expense, and income tax payable for 2022. (5 marks)

Prepare all journal entries to record Spring's 2022 income taxes. (13 marks)

Prepare the income tax expense section of Spring's income statement beginning with the line "Income before income tax". (2 marks)

Calculate Spring's 2022 effective income tax rate. (1 mark)

Prepare a note reconciling the statutory and effective tax rates for 2022. (4 marks)

Provide the statement of financial position presentation for any resulting future income tax accounts at December 31, 2022. Be specific about the classification. (2 marks)