Question 1 (12 marks) Dow Breweries Inc

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Question 1 (12 marks)

Dow Breweries Inc. (DBI) reported the following information at the beginning of its current fiscal year:

Deferred income tax asset (warranties)                                             $ 2,400 (dr)

Deferred income tax liability (depreciable assets)                            10,500 (cr)

During the year, Vanier reports the following information:

-Pre-tax income was $850,000 and the tax rate was 32%;

-Depreciation expense was $75,000 and the CCA was $80,000. The net book value for accounting purposes of property, plant, and equipment at the end of the year was $420,000 while the UCC was $380,000;

-Warranty expense was reported at $40,000 while actual cash paid out was $38,000. The warranty liability had a year-end balance of $10,000.

-No other items affected deferred tax amounts other than these transactions.

Req:

1. Prepare the journal entries to record income tax for the year. 
2. Provide the income statement section commencing with "Net income before taxes.