Financial Accountant
Zdon Inc. reports accounting income of $105,000 for 2020, its first year of operations. The following
items cause taxable income to be different than income reported on the financial statements.
1. Capital cost allowance (on the tax return) is greater than depreciation on the income statement by $16,000.
2. Rent revenue reported on the tax return is $24,000 higher than rent revenue reported on the income
statement.
3. Non-deductible fines appear as an expense of $15,000 on the income statement.
4. Zdon's tax rate is 30% for all years and the company expects to report taxable income in all future years. Zdon
reports under IFRS.
Instructions
a. Calculate taxable income and income tax payable for 2020.
b. Calculate any deferred tax balances at December 31, 2020.
c. Prepare the journal entries to record income taxes for 2020.
d. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income
before income tax.”
e. Reconcile the statutory and effective rates of income tax for 2020. Round rates to one decimal place.
f. Provide the SFP presentation for any resulting deferred tax accounts at December 31, 2020. Be specific
about the classification.
g. Repeat part (f) assuming Zdon follows ASPE.
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$76,100 for 2020. The following items cause taxable income to be
different than pretax financial income.
1.Depreciation on the tax return is greater than
depreciation on the income statement by $16,700.2.Rent collected on
the tax return is greater than rent recognized on the income
statement by $22,700.3.Fines for pollution appear as an expense of
$11,100 on the income statement.
Teal’s tax rate is 30% for all years, and the company
expects to report...
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