Reference no: EM132733858
Problem - The following information is available for the first three years of operations for Faberge Corporation:
1. Year - Accounting Income
2017 - $250,000
2018 - 180,000
2019 - 200,000
2. On January 2, 2017, equipment was purchased for $500,000. The equipment had an estimated service life of 5 years and no residual value. Straight-line depreciation is used for book purposes and CCA at 30% is used for tax purposes (subject to the half year rule for the first year).
3. On January 2, 2018, $210,000 was collected in advance for the rental of a building for three years. The entire $210,000 was included in taxable income in 2018, but two-thirds of the $210,000 was reported as unearned revenue at December 31, 2018 for book purposes.
4. The enacted tax rate is 40% for all years.
Required -
a) Prepare a schedule comparing depreciation for book purposes with CCA for tax purposes (for 2017 - 2019).
b) Determine the deferred tax asset or liability at the end of 2017.
c) What is the deferred tax asset and/or liability at the end of 2018?
d) Prepare the adjusting journal entries to record income tax expense, deferred taxes, and income tax payable for 2018.
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