The following information applies to Edward Corporation, which reports under IFRS.
1. Prior to 2016, taxable income and accounting income were identical.
2. Accounting income was $1.7 million in 2016 and $1.4 million in 2017.
3. On January 1, 2016, equipment costing $1 million was purchased. It is being depreciated on a straight-line basis over eight years for financial reporting purposes, and is a Class 8-20% asset for tax purposes.
4. Tax-exempt interest income of $60,000 was received in 2017.
5. The tax rate is 30% for all periods.
6. Taxable income is expected in all future years.
7. Edward Corporation had 100,000 common shares outstanding throughout 2017.
Instructions
(a) Calculate the amount of capital cost allowance and depreciation expense for 2016 and 2017, and the corresponding carrying amount and undepreciated capital cost of the depreciable assets at the end of 2016 and 2017.
(b) Determine the amount of current and deferred tax expense for 2017.
(c) Prepare the journal entry(ies) to record 2017 income taxes.
(d) Prepare the bottom portion of Edward's 2017 income statement, beginning with the line "Income before income tax."
(e) Indicate how deferred taxes should be presented on the December 31, 2017 statement of financial position.
(f) How would your responses to parts (a) to (e) change if Edward Corporation followed the ASPE future/deferred income taxes method?