DI is a public company that started operations in 2020. It opened a number of...
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Accounting
DI is a public company that started operations in 2020. It opened a number of locations across Canada. In fiscal 2020, DI had net income before tax of $390,000. The tax rate for 2020 was 25%. DI has a December 31 year-end. The following occurred during 2020.
DI purchased assets with an original cost of $780,000. The total depreciation for 2020 was $42,000. For tax purposes, DI had $12,000 CCA deducted.
For sales during 2020 DI recognized warranty expenses of $54,000. Actual warranty work completed during 2020 was $42,000.
DI contributed $12,000 to a local political campaign and expensed these costs during the year.
DI recognized revenues of $650,000 in 2020. Only $440,000 of these revenues were collected and taxed during the year. The remainder will not be taxed until they are due and collected next year.
Required:
Compute the taxable income and income tax payable in 2020. Show all supporting calculations. (5 marks)
Prepare the journal entries to record income tax expense, deferred taxes and income tax payable in 2020 for DI. (5 marks)
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