P18-1 Anthony Ltd. began business on January 1, 2016. At December 31, 2016, it had a $4,500 balance in the
Deferred Tax Liability account that pertains to property, plant, and equipment acquired during 2016 at a cost of $900,000. The property, plant, and equipment is being depreciated on a straight-line basis over six years for fi nancial reporting purposes, and is a Class 8—20% asset for tax purposes. Anthony's income before income tax for 2017 was $60,000. Anthony Ltd. follows IFRS and the half-year convention for depreciation.
2017. 1. In 2017, the company paid $56,250 for rent; of this amount, $18,750 was expensed in 2017. The other $37,500 will be expensed equally over the 2018 and 2019 accounting periods. The full $56,250 was deducted for tax purposes in 2017. 2. Anthony Ltd. pays $9,000 a year for a membership in a local golf club for the company's president. 3. Anthony Ltd. now offers a one-year warranty on all its merchandise sold. Warranty expenses for 2017 were $9,000. Cash payments in 2017 for warranty repairs were $4,500. 4. Meals and entertainment expenses (only 50% of which are ever tax deductible) were $12,000 for 2017. 5. The maximum allowable CCA was taken in 2017. There were no asset disposals for 2017. Income tax rates have not changed since the company began operations.
(a) Calculate the balance in the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2017. (b) Calculate income tax payable for 2017. (c) Prepare the journal entries to record income taxes for 2017. (d) Prepare the income tax expense section of the income statement for 2017, beginning with the line "Income before income tax." (e) Indicate how deferred taxes should be presented on the December 31, 2017 statement of fi nancial position. (f) How would your response to parts (a) to (e) change if Anthony reported under ASPE?
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