The Milobar Corporation, a public company, provided you with the following information relative to its December 31, 20x4 year-end:
Net income before taxes $3,356,000
Included in the calculation of the above are the following items:
Depreciation expense 1,567,000
Warranty expense 345,300
Pension expense 578,000
Meals and entertainment expense 34,000
Dividends received from taxable Canadian corporations 12,500
Gain on disposal of equipment 25,000
Depreciation on finance lease 234,500
Interest expense on finance lease 112,450
Additional information -
• the following information is available as of December 31, 20x3:
Net book value of PPE $13,657,800
Undepreciated capital cost 9,345,000
Warranty liability 214,300
Pension asset 432,000
At December 31, 20x3, the company had 8300,000 of non-capital losses that can
be utilized to reduce taxable income. Management believed that it was more likely than not that the losses would be utilized.
the following information is available for the 20x4 year:
|
Maximum CCA claim
|
$2,107,000
|
|
Warranty costs incurred
|
312,400
|
|
Contributions made to pension plan trustee
|
100,000
|
|
Lease payments on finance leases
|
385,400
|
The finances leases were signed during 20x4. There were no finance leases outstanding at December 31, 20x3.
There is no OCI relative to the pension plan.
• additions to PPE during the year were $1,200,000. One asset was disposed of. This asset had a carrying value of S120,000 and an original cost of $150,000.
• the company disposed of a major operating segment during the year. The disposal qualifies as a discontinued operation. The total pre-tax loss from operations and impairment loss on the segment is $454,200. This amount is not included in the net income before taxes.
• The company purchased an investment in 20x4 costing $150,000. The investment was classified as FVTOCI. The fair value of the investment at the end of the year is S200,000. No entries were made to account for the fair value change at December 31.
• The tax rate at December 31, 20x3 was 28%. The tax rate for the year ended December 31, 20x4 was 25% (this was not known at the end of 20x3). The tax rate for the year 20x5 is 23.5% and was enacted at the end of 20x4.
Required -
a. Calculate the current and deferred portion of income tax expense for the year ended December 31, 20x4. Write the journal entries to record both the current and deferred portions.
b. Prepare the bottom portion of the statement of comprehensive income for the year ended December 31, 20x4 starting with Net Income Before Taxes.