Question - Sarasota Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company obtained a contract to construct a road for the municipality of Cochrane West, and it is estimated that the project will be completed over a three-year period starting in June 2017. Sarasota uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Sarasota uses the completed-contract method allowed by the CRA. By its first fiscal year end, the accounts related to the contract had the following balances:
| Accounts Receivable |
$338,000 |
| Construction in Process |
504,000 |
| Revenue from Long-Term Contracts |
504,000 |
| Construction Expenses |
350,000 |
| Billings on Construction in Process |
420,000 |
The accounts related to the equipment that Sarasota purchased to construct the road had the following balances at the end of the first fiscal year ending December 31, 2017 for accounting and tax purposes:
| Equipment |
$1,130,000 |
| Accumulated Depreciation-Equipment |
186,000 |
| Undepreciated Capital Cost |
995,000 |
Sarasota's tax rate is 45% for 2017 and subsequent years. Income before income tax for the year ended December 31, 2017, was $187,000. Sarasota reports under IFRS.
Calculate the deferred tax asset or liability balances at December 31, 2017.