In 2024 the government announced a further tax rate reduction will be effective for the 2027 taxation year. The new rate will be 15%. Prepare the journal entry to adjust deferred taxes for the reduced rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Deferred Tax Expense Debit Credit Deferred Tax Liability In 2023, Windsor Ltd., which follows IFRS, reported accounting income of $1,130,000 and the 2023 tax rate was 20%. Windsor had two timing differences for tax purposes: CCA on the company's tax return was $512,000. Depreciation expense on the financial statements was $308,000. These amounts relate to assets that were acquired on January 1, 2023, for $2,048,000. Accrued warranty expense for financial statement purposes was $140,600 (accrued expenses are not deductible for tax purposes). This is the first year Windsor offers warranties. Both of these timing differences are expected to fully reverse over the next four years, as follows: Year Depreciation Difference Warranty Expense Rate 2024 $70,500 $20,500 20% 2025 57,500 29,900 20% 2026 40,500 39,600 18% 2027 35,500 50,600 18% $204,000 $140,600
In 2024 the government announced a further tax rate reduction will be effective for the 2027 taxation year. The new rate will be 15%. Prepare the journal entry to adjust deferred taxes for the reduced rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Deferred Tax Expense Debit Credit Deferred Tax Liability In 2023, Windsor Ltd., which follows IFRS, reported accounting income of $1,130,000 and the 2023 tax rate was 20%. Windsor had two timing differences for tax purposes: CCA on the company's tax return was $512,000. Depreciation expense on the financial statements was $308,000. These amounts relate to assets that were acquired on January 1, 2023, for $2,048,000. Accrued warranty expense for financial statement purposes was $140,600 (accrued expenses are not deductible for tax purposes). This is the first year Windsor offers warranties. Both of these timing differences are expected to fully reverse over the next four years, as follows: Year Depreciation Difference Warranty Expense Rate 2024 $70,500 $20,500 20% 2025 57,500 29,900 20% 2026 40,500 39,600 18% 2027 35,500 50,600 18% $204,000 $140,600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:In 2024 the government announced a further tax rate reduction will be effective for the 2027 taxation year. The new rate will be
15%. Prepare the journal entry to adjust deferred taxes for the reduced rate. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
List debit entry before credit entry.)
Account Titles and Explanation
Deferred Tax Expense
Debit
Credit
Deferred Tax Liability
Transcribed Image Text:In 2023, Windsor Ltd., which follows IFRS, reported accounting income of $1,130,000 and the 2023 tax rate was 20%. Windsor had
two timing differences for tax purposes:
CCA on the company's tax return was $512,000. Depreciation expense on the financial statements was $308,000. These amounts
relate to assets that were acquired on January 1, 2023, for $2,048,000.
Accrued warranty expense for financial statement purposes was $140,600 (accrued expenses are not deductible for tax purposes).
This is the first year Windsor offers warranties.
Both of these timing differences are expected to fully reverse over the next four years, as follows:
Year
Depreciation
Difference
Warranty
Expense Rate
2024
$70,500
$20,500
20%
2025
57,500
29,900
20%
2026
40,500
39,600
18%
2027
35,500
50,600
18%
$204,000
$140,600
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education