Question

P18-3

Eloisa corporation applies IFRS. Information about Eloisa corporation income before income tax of 633,000 for its year ended December 31 2017 includes:

1. CCA reported on the 2017 tax return exceeded depreciation reported on the income statement by 100,000$. This difference plus the 150,000 accumulated taxable temporary differences at jan 1 2017 is expected to reverse in equal amounts over the 4 year period from 2018-2021.
2. Dividends received from taxable Canadian corporation were 15,000$.
3. Rent collected in advance and included in taxable income as at December 31 2016 totalled 60,000$ for a 3 year period. OF THIS AMUNT, 40,000$ was reported as unearned for book purpose at December 31 2017. Eloisa reports unearned revenue as a current liability if it will be recognized in income within 12 months from the balance sheet date. Eloisa paid 2,880$ interest penalty for late income tax instalments. The interest penalty is not deductible for income tax purpose at any time.
4. Equipment was disposed during the year for 90,000$. The equipment had a cost of 105,00$ and accumulated depreciation to the rate of disposal of 37,000$. The total proceeds on the sale of these assets reduced the CCA class, in other words no gain or loss reported.
5. Eloisa recognized a 75,000$ loss on impairment of a long term investment whose value was considered impaired. He income tax act permits the loss to be deducted only when the investment is sold and the loss is actually realize. The investment was accounted for at amortized cost.
6. The tax rates are 30% for 2017 and 25% for 2018 and subsequent years. These rates have been enacted and known for the past 2 years.

A) calculate the balance in the deferred tax asset or deferred tax liability account at December 31 2016

Answer 1

	2018	2019	2020	2021	TOTAL
Excess CCA over Depreciation
Future Taxable Income (150000/4)	$           37,500	$           37,500	$          37,500	$                37,500	$        1,50,000
Tax Rate enacted for the year	25%	25%	25%	25%
Deferred Tax Liability	$              9,375	$             9,375	$             9,375	$                  9,375	$            37,500
Unearned Rent	2017	2018	2019	TOTAL
Future Deductible Amount	$           20,000	$           20,000	$          20,000	$                60,000
Tax Rate enacted for the year	30%	25%	25%
Defereec Tax Assets	$              6,000	$             5,000	$             5,000	$                16,000
At December 31, 2016
Deferred Tax Liability		$           37,500
Less: Deferred Tax Assets		$           16,000
Balance in Deferred Tax Liabilty		$           21,500