In 2020, Pina Ltd., which follows IFRS, reported accounting income of $1,178,000 and the 2020 tax...

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Accounting

In 2020, Pina Ltd., which follows IFRS, reported accountingincome of $1,178,000 and the 2020 tax rate was 20%. Pina had twotiming differences for tax purposes:

CCA on the company’s tax return was $476,500. Depreciation expenseon the financial statements was $283,000. These amounts relate toassets that were acquired on January 1, 2020, for $1,906,000.

Accrued warranty expense for financial statement purposes was$138,100 (accrued expenses are not deductible for tax purposes).This is the first year Pina offers warranties.

Both of these timing differences will fully reverse over the nextfour years, as follows:
Year Depreciation
Difference Warranty
Expense Rate
2021 $67,500 $19,100 20%
2022 51,500 28,600 20%
2023 40,500 40,000 18%
2024 34,000 50,400 18%
$193,500 $138,100
Prepare the journal entries to record income taxes for 2020
In 2021 the government announced a further tax rate reductionwill be effective for the 2024 taxation year. The new rate will be15%. Prepare the journal entry to adjust deferred taxes for thereduced rate.

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Pina Ltd:
Year-2020			Deferred tax liability calculation for 2020
Accounting Income	1178000
Add: Depreciation expense	283000			Depreciation	Warranty
Add: Accrued Warranty expenses	138100			difference	expense	Rate	Deferred tax liability
	1599100		2021	67500	19100	20%	9680
Less: CCA deduction as per the Income			2022	51500	28600	20%	4580
tax act	476500		2023	40500	40000	18%	90
Taxable Income	1122600	55400	2024	34000	50400	18%	-2952
							11398
Income tax	224520
			Deferred tax liability calculation for 2021
Deferred tax liability	11398
				Depreciation	Warranty
Journal entries to record income tax for 2020				difference	expense	Rate	Deferred tax liability
	Debit($)	Credit($)	2021	67500	19100	20%	9680
Income tax expense	224520		2022	51500	28600	20%	4580
Income tax payable		224520	2023	40500	40000	18%	90
			2024	34000	50400	15%	-2460
Deferred tax expense	11398						11890
Deferred tax liability		11398

Journal entries to record income tax for 2021

Deferred tax expense	492
Deferred tax liability		492

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In 2020, Pina Ltd., which follows IFRS, reported accountingincome of $1,178,000 and the 2020 tax rate was 20%. Pina had twotiming differences for tax purposes:CCA on the company’s tax return was $476,500. Depreciation expenseon the financial statements was $283,000. These amounts relate toassets that were acquired on January 1, 2020, for $1,906,000.Accrued warranty expense for financial statement purposes was$138,100 (accrued expenses are not deductible for tax purposes).This is the first year Pina offers warranties.Both of these timing differences will fully reverse over the nextfour years, as follows:YearDepreciationDifferenceWarrantyExpenseRate2021$67,500$19,10020%202251,50028,60020%202340,50040,00018%202434,00050,40018%$193,500$138,100Prepare the journal entries to record income taxes for 2020In 2021 the government announced a further tax rate reductionwill be effective for the 2024 taxation year. The new rate will be15%. Prepare the journal entry to adjust deferred taxes for thereduced rate.

Year	Depreciation Difference	Warranty Expense	Rate
2021	$67,500	$19,100	20%
2022	51,500	28,600	20%
2023	40,500	40,000	18%
2024	34,000	50,400	18%
	$193,500	$138,100