The records for Newfoundland Inc. show the following data for calendar 2020:

1. Pre-tax accounting income is $ 275,000. The enacted income tax rate is 30%.

2. The gross profit on construction contract calculated using percentage of completion recorded on the books was $ 150,000. No contracts were completed in 2020 and so the gross profit for tax purposes was $ 0.

3. Interest paid on late and deficient tax instalments was $ 4,000.

4. Equipment was acquired in January 2020 for $ 350,000. Newfoundland uses straight-line depreciation over a ten-year life (no residual value). For tax purposes, Newfoundland uses CCA at 40%, only half of this amount is deductible during the year of purchase.

5. Newfoundland held FV-NI investments on which $ 1,900 unrealized losses were recorded at the end of 2020.

Instructions

a) Prepare a schedule (starting with pre-tax accounting income) to calculate taxable income. (8 marks)

b) Prepare entries for the current year income tax expense; (2 marks)

c) Prepare separate entries for the deferred tax expense, benefit and deferred tax asset, liability. (6 marks)