Exercise 18-12 Bramble Corporation purchased equipment very late in 2017. Based

Question

Exercise 18-12

Bramble Corporation purchased equipment very late in 2017. Based on generous capital cost allowance rates provided in the Income Tax Act, Bramble Corporation claimed CCA on its 2017 tax return but did not record any depreciation because the equipment had not yet been put into use. This temporary difference will reverse and cause taxable amounts of $34,800 in 2018, $31,100 in 2019, and $46,700 in 2020. Bramble’s accounting income for 2017 is $237,200 and the tax rate is 34% for all years. There are no deferred tax accounts at the beginning of 2017.

a) Calculate the deferred tax balance at December 31, 2017.

b) Calculate taxable income and 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.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Bramble Corporation
(Partial) Income Statement

For the Month Ended December 31, 2017For the Year Ended December 31, 2017December 31, 2017

Deferred Tax LiabilityIncome Tax Expense - CurrentIncome Tax Expense - DeferredIncome Before Income TaxNet Income / (Loss)Current Income Tax BenefitDeferred Tax Asset

$

    Income Tax Expense - Current    Income Tax Expense - Deferred    Current Income Tax Benefit    Deferred Tax Asset    Deferred Tax Liability    Income Before Income Tax    Net Income / (Loss)    

$

    Income Tax Expense - Current    Income Before Income Tax    Current Income Tax Benefit    Net Income / (Loss)    Income Tax Expense - Deferred    Deferred Tax Asset    Deferred Tax Liability    

Income Tax Expense - CurrentDeferred Tax AssetIncome Tax Expense - DeferredIncome Before Income TaxNet Income / (Loss)Current Income Tax BenefitDeferred Tax Liability

$

Explanation / Answer

Solution a:

Solution b:

Solution c:

Solution d:

Bramble Corporation Computation of Deferred Tax balance at December 31, 2017 Year Reversal of temporary differences - Depreciation Tax Rate Deferred Tax Liability 2018 $34,800.00 34% $11,832.00 2019 $31,100.00 34% $10,574.00 2020 $46,700.00 34% $15,878.00 $112,600.00 $38,284.00

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.