Question

For the year ended December 31, 2017, Kingbird Ltd. reported income before income taxes of $98,000. In 2017, Kingbird Ltd. paid $75,000 for rent; of this amount, $25,000 was expensed in 2017. The remaining $50,000 was treated as a prepaid expense for accounting purposes, and would be expensed equally over the 2018-2019 period. The full $75,000 was deductible for tax purposes in 2017. The company paid $73,000 in 2017 for membership in a local golf club (which was not deductible for tax purposes). In 2017 Kingbird Ltd. began offering a 1-year warranty on all merchandise sold. Warranty expenses for 2017 were $40,000, of which $26,000 was actual repairs for 2017 and the remaining $14,000 was estimated repairs to be completed in 2018. Meal and entertainment expenses totalled $21,000 in 2017, only half of which were deductible for income tax purposes. Depreciation expense for 2017 was $170,000. Capital Cost Allowance (CCA) claimed for the year was $195,000. Kingbirdwas subject to a 28% income tax rate for 2017. Kingbird follows IFRS. At January 1, 2017, Kingbird Ltd. had no balances in deferred tax accounts. Calculate taxable income and taxes payable for 2017. Taxable income, 2017 $ Taxes payable, 2017 $

Answer 1

Total taxable income : $ 63,500 (i.e. loss of $ 63,500)

Total tax payable is Nil as there is loss

Also, Deferred tax expense that need to be booked : $ 68,600

(Detailed calculations are mentioned in the image above)