Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020: Depreciation expense $540,000 Capital cost allowance $690,000 Warranty expense $130,000 Warranty costs incurred $155,000 Hostra entered into an equipment lease on January 2, 2020. The first lease payment of $135,000 was made on that date. The interest on the right-of-use asset was $24,000, and the depreciation expense was $75,000. (The depreciation expense on the right-of-use asset is included in the $540,000 depreciation expense above.). Hostra’s deferred income tax liability at the beginning of 2020 was based on the following: a difference between the carrying value ($7,600,000) and undepreciated capital cost of property, plant, and equipment ($4,300,000) a warranty liability of $320,000 The tax rate for the year ended December 31, 2019, was 25%. The tax rate for the year ended December 31, 2020, was 26% (enacted on October 31, 2020), and the tax rate for the year ended December 31, 2021, is 30% (enacted on December 16, 2020). Required: Calculate Hostra’s deferred income tax expense for the year ended December 31, 2020.
Hostra Co. (Hostra), a publicly accountable company, has prepared the following information to calculate its income tax provision for the year ended December 31, 2020:
|
|
$540,000 |
|
Capital cost allowance |
$690,000 |
|
Warranty expense |
$130,000 |
|
Warranty costs incurred |
$155,000 |
Hostra entered into an equipment lease on January 2, 2020. The first lease payment of
$135,000 was made on that date. The interest on the right-of-use asset was $24,000, and the depreciation expense was $75,000. (The depreciation expense on the
right-of-use asset is included in the $540,000 depreciation expense above.).
Hostra’s
- a difference between the carrying value ($7,600,000) and undepreciated capital cost of property, plant, and equipment ($4,300,000)
- a warranty liability of $320,000
The tax rate for the year ended December 31, 2019, was 25%. The tax rate for the year ended December 31, 2020, was 26% (enacted on October 31, 2020), and the tax rate
for the year ended December 31, 2021, is 30% (enacted on December 16, 2020).
Required:
Calculate Hostra’s deferred income tax expense for the year ended December 31, 2020.
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