Question

Hogan Ltd. started as a manufacturing company on January 1, 2021. On January 1, 2021, Hogan purchased $60,000 of equipment which it is amortizing on a straight-line basis over 5 years for accounting purposes under IFRS. The equipment is subject to a 15% CCA rate for income tax purposes, and is eligible for the Accelerated Investment Initiative (i.e. 1.5 times the CCA rate) in the year of acquisition. In 2021, Hogan reported net income before income taxes of $425,000. Included on the company's income statement was meals and entertainment expense of $44,000. At the end of 2022, Hogan reported net income before taxes of $510,000, and meals and entertainment expense of $38,000. The income tax rate for 2021 was 23%. On March 15, 2022, the tax rate for 2022 and later years dropped to 22%. This rate change was not known at the end of 2021.| REQUIRED: Prepare the journal entries required to record Hogan Ltd.'s income taxes for 2021 and 2022. Show all your calculations.

Answer 1

Credit Debit $60,000 Dr $60,000 Dr $13,500 $13,500 Dr $22,000 $22,000 Dr $89,585 Sl.no Jornal Enrty For Year 2021 Equipment Account A/C 1 To Bank Account A/C Depreciation Account A/C 2 To Equipment Account A/c Meal & Entertainment Expenses Account A/c 3 To Bank Account A/C Income Tax Expense Account A/c 4 To Cash/Bank Account A/C Sr. No Jornal Enrty For Year 2022 Depreciation Account A/C 1 To Equipment Account A/C Meal & Entertainment Expenses Account A/c 2 To Bank Account A/C Income Tax Expense Account A/c 3 To Cash/Bank Account A/C $89,585 Credit Debit $9,000 Dr $9,000 Dr $19,000 $19,000 Dr $106,040 $106,040

Notes and Calculation Table: Description Net Income Before Income Taxes Depreciation 2021 2022 Remarks $425,000 $510,000 Given in Question In a time of Acquisition, according to Accelerated Investment Initiative, Depreciation charges 1.5 Times of CCA Rate of 15% for example 22.5% and in $13,500 $9,000 following year charged according to Normal CCA Rate of 15 %, It is expected that hardware conveyed around the same time of Acquisition. $22,000 $19,000 Just half Deduction permitted on the off chance that Meals and Entertainment $389,500 $482,000 23% 22% Given in Question $89,585 $106,040 Meals & Entartainment Expenses Net Taxable Income Income Tax Rate Income Tax