Pharoah Corporation purchased equipment very late in 2023. Based on generous capital cost allowance rates provided in the Income Tax Act, Pharoah claimed CCA on its 2023 tax return but did not record any depreciation because the equipment was being tested. This temporary difference will reverse and cause taxable amounts of $32,900 in 2024, $31,800 in 2025, and $49,800 in 2026. Pharoah's accounting income for 2023 is $241,000 and $217,000 in each of 2024 and 2025, and the tax rate for 2023, 2024 and 2025 is 30%. There are no deferred tax accounts at the beginning of 2023. Pharoah Corporation was informed on December 31, 2024 that the enacted rate for 2025 and subsequent years is 25%. (a) Your answer is partially correct. Calculate the deferred tax balances at December 31, 2024 and 2025.

Pharoah Corporation purchased equipment very late in 2023. Based on generous capital cost allowance rates provided in the Income Tax Act, Pharoah claimed CCA on its 2023 tax return but did not record any depreciation because the equipment was being tested. This temporary difference will reverse and cause taxable amounts of $32,900 in 2024, $31,800 in 2025, and $49,800 in 2026. Pharoah's accounting income for 2023 is $241,000 and $217,000 in each of 2024 and 2025, and the tax rate for 2023, 2024 and 2025 is 30%. There are no deferred tax accounts at the beginning of 2023. Pharoah Corporation was informed on December 31, 2024 that the enacted rate for 2025 and subsequent years is 25%. (a) Your answer is partially correct. Calculate the deferred tax balances at December 31, 2024 and 2025.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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