Seenath Ltd. began operations on January 1, 2020, and adheres to IFRS. Its pre-tax accounting income for the first two y

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Seenath Ltd. began operations on January 1, 2020, and adheres to
IFRS. Its pre-tax accounting income for the first two years was as
follows:
2020 $
80,000
2021 150,000
The following items caused the only differences between pre-tax
accounting income and taxable income.
1. In 2020, the
company collected $ 75,000 in rental revenue; of this amount, $
25,000 was earned in 2020; the other $ 50,000 will be earned
equally during 2021 and 2022. The full $
75,000 was included in taxable income in 2020.
2. The company
pays $ 5,000 a year for membership in a local golf club.
3. In 2021, the
company terminated a top executive and agreed to pay $ 30,000
severance pay. This will be paid $ 10,000 each year for three
years, starting in 2021. The 2021 payment was made as scheduled.
The entire $ 30,000 was expensed in 2021 for book purposes. For tax
purposes, the severance pay is deductible only when it is paid.
The enacted tax rates at December 31, 2020 are:
2020 30% 2022 40%
2021 35% 2023 40%
Instructions
a) Calculate
taxable income for 2020 and 2021.
b) Calculate
the deferred tax asset and/or liability at the end of 2020, and
prepare the adjusting journal entries to record income taxes for
2020.
c) Prepare a
schedule of future taxable and deductible amounts at the end of
2021.
d) Prepare a
schedule of the deferred tax asset and/or liability at the end of
2021.
e) Calculate
the deferred tax expense (benefit) for 2021.
f) Prepare the adjusting journal
entries to record income taxes for 2021 (both current and
deferred).