Calculate the future income tax expense

Assignment Help Taxation
Reference no: EM13693331

In 2014, the first year of its existence, RaonicLtd.'s accountant, in preparing both the income statement and the tax return, developed the following list of items creating differences between accounting and taxable income:

1. The company sells its merchandise on an instalment contract basis. In 2014,Raonic elected, for tax purposes, to report the gross profit from these sales in the years the receivables are collected. However, for financial statement purposes, the company recognized all the gross profit in 2014. These procedures created a $240,000 difference between book and taxable incomes for 2014. Future collections of instalment receivables are expected to result in taxable amounts of $120,000 in each of the next two years.

2. The company depreciates all of its property, plant and equipment using CCA for tax purposes and straight-line for accounting purposes. This resulted in $42,000 excess CCA over accounting depreciation. This temporary difference will reverse equally over the three year period from 2015-2017.

3. On July 1, 2014, Raonic leased part of its building to Swift Books Ltd on a two-year operating lease. The monthly rent is $30,000, and Swift paid the first year's rent in advance (July 1, 2014 to June 30, 2015). Raonic reported the entire amount on its tax return. Thisresulted in an $180,000 difference between book and taxable incomes.

4. Raonic sold $150,000 of bonds issued by the Government of Canada at a gain of $18,000, which was included as other income in its income statement. A taxable capital gain of $9,000 was reported for tax purposes.

5. In 2014, Raonic insured the lives of its chief executives. The premiums paid were $12,000 and this amount was shown as an expense on the income statement. However, this amount was not deductible for tax purposes. The company is the beneficiary.

Raonic is a publicly accountable enterprise adhering to IFRS. Their 2014 income statement showed "Income before income taxes" of $900,000. The currently enacted income tax rate (and for the foreseeable future) is 40%. Except for those items mentioned above, there are no other differences between book and taxable incomes.

Instructions

(a) Calculate the taxable income and income tax payable for 2014.

Income before income taxes: $900,000

Less: $240,000 merchandise

Add: $42,000 property, plant and equipment

Add: $180,000 lease

Less: $12,000 executive life insurance

Less: $9000 bond gain

Taxable income for 2014: $51,000

Income Tax payable: $51,000 x 40% = $20,400

(b) Prepare aschedule of any future taxable/deductible amounts at the end of 2014.

(c) Prepare a continuity schedule(s) of the future income tax asset and/orfuture income tax liability at the end of 2014.

(d) Calculate the future income tax expense (benefit) for 2014.

(e) Prepare the journal entry(ies) recording income tax expense, income tax payable, and future income taxes for 2014.

(f) Raonic adheres to IFRS. How would the income tax expense and any future income taxes be disclosed on the financial statements (i.e. the Statement of Comprehensive Income and the Statement of Financial Position)?

(g) Prepare the Effective Tax Rate Note to the 2014 financial statements.

Reference no: EM13693331

Questions Cloud

Explain how reckless'' theory of containment : Explain how Reckless' theory of Containment
Course wrap-up : Course Wrap-Up
Brand function as the link between consumers and companies : Brand function as the link between consumers and companies
Write a thorough discussion paper on shared risk contracting : Write a thorough discussion paper on Shared Risk Contracting
Calculate the future income tax expense : Prepare a schedule of any future taxable/deductible amounts at the end of 2014 and prepare a continuity schedule(s) of the future income tax asset and/orfuture income tax liability at the end of 2014.
What is corporate planning : What is corporate Planning
What should tracker record as its current federal income tax : What should Tracker record as its current federal income tax liability at December 31, 2008, assuming a corporate income tax rate of 30 percent?
Study on remembering knowledge learned in school : Study on remembering knowledge learned in school assessed learning
The effective funtioning of a person hinges : The effective funtioning of a person hinges

Reviews

Write a Review

 

Taxation Questions & Answers

  Individual tax task on financial information

Spouse A is one of the partners in Fan Company A. Spouse A is married and has a total of three children living in the household. Spouse A and Spouse B have one 10-year-old child together.

  Questiongeorge large and his wife marge large who live at

questiongeorge large and his wife marge large who live at 2000 lakeview drive cleveland ohio 49001 want you to prepare

  Find amend the 2010 return

Constance, who is single, is in an automobile accident in 2010, and her car sustains $6,200 in damages. Because both drivers received tickets in the accident, Constance does not expect to recover any of the loss from her insurance company.

  Evaluate janice morgans federal income tax payable

Evaluate Janice Morgans Federal income tax payable

  Use of budgeted usage

Could the use of "budgeted usage" potentially cause some fixed costs to stay unallocated in the support department cost center?

  Advise periwinkle of its fbt consequences arising out

Advise Periwinkle of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2014 and how would your answer to (a) differ if Emma used the $50,000 to purchase the shares h..

  Question 1 prior to 2012 pretax financial income and

question 1. prior to 2012 pretax financial income and taxable income were identical.2. pretax financial income is

  Determine the hong kong property tax liabilities

Determine the Hong Kong property tax liabilities for Mr Leung for the years of assessment 2010/11 and 2011/12. Ignore provisional property tax and any tax waiver or refund. The standard tax rate for years of assessment 2010/11 and 2011/12 is 15%.

  Would a corporation be required to file a federal income tax

The corporation has disposed of all of its assets except for a small sum of cash retained to pay state taxes to preserve its corporate charter. Would a corporation be required to file a federal income tax return and under which section?

  Adjusting entry to account for sales tax

Carl's Video adds the amount of sales taxes collected directly in price charged for merchandise, and total amount is credited to Sales. During January, Sales was credited for $239,680. The 31st January adjusting entry to account for a 7 percent st..

  Benefit to taxpayers in structuring transactions

Federal Income Taxation of Corporations and Shareholders - Benefit to taxpayers in structuring transactions to fall within these definitions.

  Implications in relation to the taxability

Advise the directors as to the Hong Kong profits tax implications in relation to the taxability of profits of the Korean Company, as well as the profits accruing to the Hong Kong entity involved.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd