You are preparing the tax section of your companys financial statements. During the current year 2022, your company acquired equipment that cost $3.6 million. The ending balance shows a deferred tax liability of $18,000 related to equipment. The equipment is being depreciated over six years for financial reporting purposes and is a Class 8 - 20% for tax purposes with half in year of acquisition. Depreciation expense was $300,000 for accounting purposes for 2022. Income before tax for 2022 was $440,000. Your company follows the APSE future/deferred income taxes method.

Meals and entertainment expenses (only 50% deductible for tax) were $48,000 for 2022. The company paid your annual golf membership of $12,000. In 2022, the company paid rent of $300,000. $100,000 related to 2022, and $100,000 relates to each of 2023 and 2024. Rent is deductible when paid for tax purposes. The company accrued warranty expenses of $36,000. Cash payments related to warranties were $18,000. Depreciation expense was $300,000 and CCA was $360,000 for 2022. Income tax rates have not changed over the past five years.

Required: Calculate the balance in the Deferred Tax Asset or Liability account at December 31, 2022. (Hint: you will need to solve for the tax rate in the problem.) Calculate income tax payable for 2022. Prepare the journal entries to record income taxes for 2022. Prepare the income tax expense section of the income statement for 2022, beginning with the line Income before income tax. Indicate how deferred taxes should be presented on the December 31, 2022 balance sheet. How would your response for parts a to e change if your company reported under IFRS?

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