Question 3 (20 MARKS) During 2018, Vancare Company first year of operations, the company reported pretax...

Question 3 During 2018, Vancare Company first year of operations, the company reported pretax financial income of $580,000. Vancare’s enacted tax rate is 35% for 2018 and 40% for all later years. Vancare expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2018, are summarized below. FUTURE YEARS 2019 2020 2021 2022 2023 Total Future taxable (deductible) amounts Instalment sales $80,000 $80,000 $80,000 $240,000 Depreciation $12,000 $12,000 $12,000 $12,000 $12,000 $ 60,000 Unearned rent ($35,000) ($35,000) ($70,000) Instructions (a) Prepare a schedule to show the calculation of deferred taxes at December 31, 2018. (b) Compute taxable income for 2018. (c) Prepare the journal entry to record income taxes payable, deferred taxes and income tax expense for 2018. Listed below are items that are treated differently for accounting purposes than they are for tax purposes. (d) (i) Explain the difference between a temporary difference and a permanent difference.

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