Intraperiod Tax Allocation and Disclosure
Welyhorsky Inc Instructions
A) Determine How and Where the Current Tax

Intraperiod tax allocation and disclosure
Welyhorsky Inc. presents you with the following information for its taxation year ending December 31, 2021. $\begin{array}{lrrr} \text{ Income from continuing operations before income taxes }& &\$ 600,000 \\\\\text{ Gain on discontinued operations} && 50,000 \\\\\text{ Correction of prior year's error in recording } \\\text{ depreciation expense on equipment. The depreciation }\\\text{ expense was understated in 2020 and the capital cost } \\\text{ allowance was correctly calculated. } && 10,000 \\\\\text{ An unrealized holding gain on investments accounted } \\\text{ for at fair value through other comprehensive income} \\\text{ (FV-OCI). Assume that this will be taxable as ordinary } \\\text{ income when it is realized } && 20,000 \\\\\text{ Taxrate all vears } && 25\% \\ \end{array}$ Instructions
a) Determine how and where the current tax expense or benefit will be reported for Welyhorsky Inc. in 2021 and provide the journal entry to record current income tax.
(b) Assume that the $ 20,000 temporary difference between the carrying amount of the FV-OCI investments and their tax base is the only temporary difference in this year. Calculate Deferred Taxes and prepare the related journal entry.
c) Prepare the necessary journal entry for the correction of prior year error.
d) Show all income tax items calculated above in their appropriate financial statement.