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Vigor Corporation reports a net income before tax for 2020 of $512,800, has a tax rate...

Vigor Corporation reports a net income before tax for 2020 of $512,800, has a tax rate of 21% and provides the following selected information (covers the three tax difference items) from its ledger as at December 31, 2019 and 2020:

2019 2020

Equipment, at cost 900,000 DR 900,000 DR

Accumulated depreciation, equipment 450,000 CR 525,000 CR

Deferred Tax Asset 10,080 DR ?

Warranty Liability 48,000 CR 56,000 CR

Deferred Tax Liability 47,250 CR ?

Depreciation expense, equipment 75,000 DR 75,000 DR

Warranty expense 27,000 DR 30,000 DR

Municipal bond interest (tax exempt) 17,800 CR 18,800 CR

The tax basis of the equipment (book value for tax purposes or the amount of the cost of the asset not yet deducted for tax purposes) is $225,000 at December 31, 2019 and $112,500 as at December 31, 2020. The tax deduction for warranties is limited to actual warranty payments.

Required:

What is the tax deduction for warranties on Vigor’s 2020 tax return?
What is taxable income for 2020?
What is income tax expense/benefit, current portion for 2020?
What is the amount of the deferred tax asset at December 31, 2020?
What is the amount of the deferred tax liability at December 31, 2020?
What was income tax expense/benefit, deferred portion for 2020?
What is Vigor’s effective income tax rate (ETR) for 2020?

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Journal of International Accounting, Auditing and Taxation

Volume 27, 2016, Pages 1-12

Interpretation of probability expressions in accounting: The effects of frame switching

Author links open overlay panelEsperanzaHuertaaGary P.Braunc

https://doi.org/10.1016/j.intaccaudtax.2016.06.001Get rights and content

Abstract

We report the results of an experiment that examines the interpretation of probability expressions included in the International Financial Reporting Standards by bicultural individuals. In particular, we examine the impact of a phenomenon known as frame switching, which occurs when the thinking processes of bicultural individuals are influenced by the language they use. We compared the interpretation of participants from two distinct cultures (Americans and Mexicans) and from participants who share both cultures (Mexican-Americans). We find, consistent with the expected effects of frame switching, that the interpretations of probability expressions by Mexican-Americans were influenced by the language in which they read the standards. The responses of Mexican-Americans reading the standards in Spanish tended toward those of Mexicans; whereas the responses of Mexican-Americans reading the standards in English tended toward the interpretations of Americans.

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Culture

Language

IFRS

Frame switching

Interpretation of accounting standards

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