90.2K

Verified Solution

Link Copied!

Rehal Services has provided the following information for use in determining its income tax obligations related to the year ended December 31, 2023. Rehal Services Income Statement For the Year Ended December 31, 2020 Revenue Service Revenue $755000 Dividend Revenue 35500 Life Insurance Claim Received 105000 Total Revenue $895500 Operating Expenses Office Expenses 18,050 Depreciation Expense 105000 Advertising Expense 21400 Meals and Entertainment Expense 17600 Rent Expense 37900 Litigation Expense 24,500 Life Insurance Premiums Paid 8100 Salaries and Wages Expense 317000 Warranty Expense 53000 Total Operating Expense 602550 Income From Operations $292950 1 .Rehal is publicly owned and uses IFRS. It has an income tax rate of 25%. The dividend revenue represents dividends received from taxable Canadian corporations. 2.During the year warranty expense of $53,000 was accrued. $10600 of this amount was paid in cash during 2023. This is the first year Rehal offers warranties on services rendered. 3.Property, plant, and equipment was purchased for $630000 on January 1, 2022. These assets are being depreciated on a straight-line basis over six years with no residual value. For tax purposes the assets are classified as Class 8, 20%. This PPE is considered eligible equipment for purposes of the Accelerated Investment Incentive (the AII) (under the AII, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate). This rate was used for 2019 4.Rehal pays for life insurance policies for its top executives. During 2020, one of the executives died, and the company received a payment of $105000 from the life insurance company. 5.On July 1, Rehal was sued by a competitor. Although the lawsuit has not been finalized, management believes that it is probable that a settlement will eventually be reached for $24,500. 6.On November 15, $30,000 was received from a customer for three months of service, beginning on November 15. One half of this amount was earned and included in revenue for 2020. Advance payments are included in taxable income when the cash is received. 7.On December 1, one of the company executives received a speeding ticket for $150. The company paid the ticket for the executive and recorded the cost as an office expense. Calculate the amount of permanent difference in 2023

Answer & Explanation Solved by verified expert

See Answer