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D TAB. 7 8 Patio Co. began operations in 2018 and follows IFRS. You, senior accountant of Patio Co., are working on the 2020 year's tax calculation and noted the following information: (1). The tax rate for 2018 and 2019 was 30%. The tax rate for 2020 and future years is 25%. The new rate was enacted in November, 2020 and was unknown prior to that date. 9 10 11 CALCULATION OF Item Accounting incom Permanent differe 12 13 14 15 16 (2). The company began operations in 2018 and the following are differences between accounting and taxable income: 2018 2019 2020 Reported on income statement: Estimated warranty expense s 18,000 S 27,000 S 43,000 Depreciation expense 48,000 48,000 48,000 Non-deductible expenses 2,000 5,000 8,000 = Cover Sheet Q1 Q2 Q3 PART A Q3 PART B Q4 Q5 Q6 + 7 Jculation Mode: Automatic Workbook Statistics Degve you more contro uomo bo to the moon the web Pracy Settings. These coon coud-based services we provided to you under the Micro Services et - QUESTION 3 PART A: CURRENT Income Tax (10 marks) B c D E F G 13 Item 2018 2019 2020 Permanent differences 14 Reported on income statement: 15 Estimated warranty expense $ 18,000S 27,000 $ 43,000 16 Depreciation expense 48,000 48.000 48,000 17 Non-deductible expenses 2,000 5,000 8,000 18 Non-taxable income 5,000 8,000 6,700 19 Advertising expense (see note 3) 37,500 Temporary differens 20 21 Reported on tax return: 22 Actual warranty costs incurred $ 15,000 $ 20,000 $ 50,000 23 Capital cost allowance 32,000 60,000 57,000 75,000 24 Advertising costs (see note 3) 25 (3). Patio Co. signed a two-year advertising service with the local radio station on January 1, 2020 for the period 26 January 1, 2020 to December 31, 2021. The total fees of $75,000 were paid on January 1, 2020. 3 PARTA 03 PART B Q4 Q5 Q6 F 22 23 24 25 A CORRENI Income Tax 10 marks D E Actual warranty costs incurred S 15,000 20,000 $ Capital cost allowance 32.000 57,000 Advertising costs (see note 3) 50,000 60,000 75,000 (3). Patio Co. signed a two-year advertising service with the local radio station on January 1, 2020 for the period 26 January 1, 2020 to December 31, 2021. The total fees of $75,000 were paid on January 1, 2020. 27 28 (4). The warranty covers all parts and labor for a one-year time period. 29 (5). For the year-ended December 31, 2020, Patio Co. reported a $500,000 accounting Income before income tax expense. This amount includes a before tax lost from discontinued operations of $50,000, of which only one-half is tax deductible. TAXABLE INCO 30 31 There are 2 tabs to this question. THE QUESTION DATA HAS BEEN PRODUCED TWICE FOR EASE OF REFERENCE. ONCE ON THIS TAB (CURRENT TAX) AND ONCE ON THE DEFERRED TAX TAB. THE DATA IS IDENTICAL ON EACH TAB. 32 Q4 Q1 Q3 PART A Q3 PART B Q5 Q2 = Cover Sheet Q6 + Calculation Mode: Automatic Workbook Statistics U w The Controller is asking you eight (8) questions regarding your calculation of current income taxes. Using your completed schedule, answer the Controller's multiple-choice questions 1-8. (1). What is the amount of accounting income? A. $450,000 B. $475,000 C. $550,000 D. $500,000 #1 Answer: (2). The 2020 year non-deductible expenses of $8,000 are considered to be a: rouocial tavos w (2). The 2020 year non-deductible expenses of $8,000 are considered to be a: A. Difference between federal and provincial taxes B. Temporary difference C. Difference between IFRS and ASPE D. Permanent difference #2 Answer (3). What adjustment is needed to accounting income regarding the 2-year advertising service? A. Add $37,500 to taxable income. B. Add-back $37,500 to accounting income. C. Add-back $75,000 to accounting income. D. Deduct $0 from accounting income as the service is completed in 2022. #3 Answer: 3 PART B 24 Q5 Q6 + or the Moon o R U w (4). When adjusting accounting income to taxable income, depreciation expense and capital cost allowance require adjustments. What is the NET adjustment needed (2 marks)? A Deduct $60,000 B. Deduct $12.000. C. Add-back $144,000. D. Add-back $12,000. 4 Answer (5). What tax rate is used to calculate the current income tax expense for the year ended December 31, 2020? A. 25% B. 15% C. 30% D. 12.5% Cover Sheet Q1 Q2 Q3 PARTA Q3 PART B Q4 05 06 + Give utomatic Workbook Statistics

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