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The following information about Norton Inc. is available for 2020: the accounting income of the year is $ 250,000. Included in the accounting income above
The following information about Norton Inc. is available for 2020:
- the accounting income of the year is $ 250,000.
- Included in the accounting income above is $10,000 dividends income from investments in taxpaying Canadian companies.
- On January 2, 2019, equipment was purchased for $ 500,000. The excess of CCA resulted a deferred tax liability of $12,250 at December 31, 2019. The depreciation and CCA schedule is as follows:
Year | Depreciation | CCA |
|
2019 | $100,000 | $150,000 |
|
2020 | 100,000 | 105,000 |
|
2021 | 100,000 | 85,000 |
|
2022 | 100,000 | 80,000 |
|
2023 | 100,000 | 80,000 |
|
| $500,000 | $500,000 |
|
- On January 2, 2020, $ 210,000 was collected in advance for the rental of a building for three years. The entire $ 210,000 was included in taxable income in 2020, but two-thirds of the $ 210,000 was reported as unearned revenue on December 31, 2020, for book purposes.
- The only deferred tax carried on Nortons balance sheet of December 31, 2019, was the $12,250 deferred tax liabilities associated with the equipment.
- The enacted tax rate is 30% for 2020 and 2021 and 25% for 2022 and thereafter.
Instructions
- Determined the taxable income and income tax payable for 2020. Show the details of the adjustments.
- Determine deferred tax asset and/or liability at the end of 2020. Show the details of your work: the item that give rise to deferred income tax assets/liabilities, whether the temporary difference is a taxable difference or deductible difference and
- Calculate the net deferred tax expense or benefit for 2020.
- Prepare the adjusting journal entries to record income tax expense, deferred taxes, and income tax payable for 2020.
- Prepare the income tax section of the comparative income statement of 2020
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