During Its First Year of Operations,Keen Corp

question 5

Essay

During its first year of operations,Keen Corp.reported the following information:
∙ Income before income taxes for the year was $650,000 and the tax rate was 25%.
∙ Depreciation expense was $200,000 and CCA was $100,000.The carrying amount of property,plant,and equipment at the end of the year was $720,000,while UCC was $820,000.
∙ Warranty expense was reported at $110,000,while actual cash paid out was $60,000.
∙ $15,000 of expenses included in income were not deductible for tax purposes.
∙ No other items affected deferred tax amounts besides these transactions.
Required:
a.Prepare the journal entries to record income tax expense for the year.
b.Assume Keen reported a loss instead of income in its first year of operations.Explain what accounting policy choices are available to Keen to record the tax implications of the loss,and provide a recommendation.

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Definitions:

Assimilation

The cognitive process of integrating new ideas, information, or experiences into existing knowledge frameworks.

Old Schema

A cognitive framework or concept that helps organize and interpret information from one's past.

Piaget

Jean Piaget, a Swiss psychologist known for his pioneering work in child development, especially regarding cognitive development stages.

Sequential Design

A research method that combines cross-sectional and longitudinal designs to observe different cohorts over time.