Problem
Data for Tag Hauer Co.'s 2022 fiscal year (its first year of operations) follows:
A. Accounting income before tax expense is $200,000. This amount includes a $50,000 loss before tax. This loss is a capital loss, of which half is allowed for tax purposes.
B. Depreciation expense for 2022 is $40,000 and CCA is $28,000.
C. Tag Hauer Co. offers a 2-year warranty and in 2022 the following data applies: Warranty expense on the income statement is $36,000 Actual warranty repair costs incurred $46,000
D. On December 30, 2022, Tag Hauer Co. received $100,000 in advance from a tenant for rent covering the 3-year period from January 1, 2023 to December 31, 2025. The entire $100,000 is taxable in 2022.
E. Expenses of $12,000 incurred in 2022 are non-deductible for tax purposes. 6. The tax rate for 2022 is 25%.
Task
I. Prepare the reconciliation between accounting income and taxable income for 2022. Make sure to properly classify differences between permanent and temporary differences.
II. Compute the current income tax expense.