DEFERRED TAX EXAMPLE 1-1

ABC Inc. has asked you to assist in the completion of their 2018 tax provision. They
have provided you with the following information;

NBV at 12/31/2017 $600,000

UCC at 12/31/2017 320,000
Warranty provision 80,000
Tax rate 45%

The following transactions occurred during 2018:

Income before taxes $1,600,000

Depreciation 160,000
Warranty provision 50,000
Actual warranty expenditures 70,000
Class 8 additions 200,000
Disallowed entertainment 75,000
Dividends from a taxable Canadian corporation 100,000

REQUIRED
1. Prepare a reconciliation of accounting income to income for tax purposes

2. Prepare the journal entries to record the 2018 tax provision

3. Assume the government has enacted an effective tax rate of 48% effective
January 1, 2019.