You are the tax consultant for Deferit Ltd., a wholesale company which has a December 31 year-end. Theowner-manager of the corporation wants to minimize Deferit's income for tax purposes. You are given thefollowing information.In June 2022, Deferit replaced a building in Class 1 (the only asset in the class) destroyed by fire in 2021with another building (new and unused non-residential building) that cost $600,000. Insurance proceeds of$400,000 were received in May 2021. The original cost in 2011 of the destroyed building was $350,000.This was the only capital asset transaction in 2021 and 2022. The undepreciated capital cost of Class 1 atthe beginning of 2021 was $238,000.Required:Compute the minimum income that must be reported for the corporation's 2021 taxation year after theabove disposition and purchase transactions have taken place. Indicate the ACB and the UCC, before CCA,of the new building.

Describing the minimum income disclosure required by the corporation for the tax year 2021 involves…

Required: Compute the minimum income that must be reported for the corporation's 2021 taxation year after the above disposition and purchase transactions have taken place. Indicate the ACB and the UCC, before CCA, of the new building.

Required: Compute the minimum income that must be reported for the corporation's 2021 taxation year after the above disposition and purchase transactions have taken place. Indicate the ACB and the UCC, before CCA, of the new building.

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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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

You are the tax consultant for Deferit Ltd., a wholesale company which has a December 31 year-end. The
owner-manager of the corporation wants to minimize Deferit's income for tax purposes. You are given the
following information.
In June 2022, Deferit replaced a building in Class 1 (the only asset in the class) destroyed by fire in 2021
with another building (new and unused non-residential building) that cost $600,000. Insurance proceeds of
$400,000 were received in May 2021. The original cost in 2011 of the destroyed building was $350,000.
This was the only capital asset transaction in 2021 and 2022. The undepreciated capital cost of Class 1 at
the beginning of 2021 was $238,000.
Required:
Compute the minimum income that must be reported for the corporation's 2021 taxation year after the
above disposition and purchase transactions have taken place. Indicate the ACB and the UCC, before CCA,
of the new building.

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