Zak Corp. purchased depreciable assets costing $600,000 on January 2, 2014. For tax purposes, the company uses CCA in a class that has a 40% rate. For financial reporting purposes, the company uses straight-line depreciation over five years. The enacted tax rate is 34% for all years. This depreciation difference is the only reversing difference the company has. Assume that Zak has income before income tax of $340,000 in each of the years 2014 to 2018.
Instructions
(a) Calculate the amount of capital cost allowance and depreciation expense from 2014 to 2018, as well as the corresponding balances for carrying amount and undepreciated capital cost of the depreciable assets at the end of each of the years 2014 to 2018.
(b) Determine the amount of taxable income in each year from 2014 to 2018.
(c) Determine the amount of deferred taxes that should be reported in the statement of financial position for each year from 2014 to 2018.
(d) Prepare the journal entries to record income taxes for each year from 2014 to 2018.
(e) Prepare the income tax entry(ies) to record income taxes for each year, assuming the management and owners have decided on the taxes payable method.