BC Co. has the following information available for the year ended December 31, 2020 in advance of preparing the provision for income taxes.

• Loss from continuing operations: $1,725,000
• OCI arising from increased market value of portfolio: $158,000
• Included in reported loss from continuing operations is the following:
  • Depreciation of capital assets……………………….…….$750,000
  • Impairment write down of intangible assets……. 50,000
  • Unusual loss due to unseasonal flooding…………. 150,000
  • Meals and entertainment…………………………………. 80,000
  • Life insurance receipt on death of CEO……………. 200,000
  • Warranty expense……………………………………………. 200,000
  • Revenue recognized on custom project…………. 175,000
  • Rent expense………………………………………………….. 60,000

• Other information gathered:

• No CCA was claimed in 2020; the balances of Undepreciated Capital Cost and Net Book Value of capital assets at the beginning of the year are $4,000,000 and 5,300,000 respectively with no additions or disposals in the year.
• Warranty payments in 2020 amounted to $200,000; the beginning of year balance in estimated warranty liability was $425,000
• The custom project was initiated at the beginning of 2019 when a customer required special design work and advanced BC Co. $400,000 at that time. The job was multiple deliverables and revenue is recognized as the deliverables are completed. $100,000 was recognized in 2019 from the advance as revenue from this project.
• Life insurance proceeds are non taxable and asset impairments are non deductible for tax purposes.
• Rent expense arises from a three year lease in the total amount of $180,000 that was paid in advance on January 1, 2018.
• BC Co.’s operating loss in 2020 is unusual and can be attributable to the cancellation or deferral of major contracts with two major clients. Prior results are more reflective of the business:

Taxable incomes and the associated statutory tax rates (in brackets) are as follows: 2016: $128,000 (30%); 2017: $240,000 (30%); 2018: $320,000 (28%); 2019: $450,000 (28%)

• To the extent available, BC Co. will recognize the benefit of available loss carry forward in 2020.
• Current year’s statutory tax rate is 26%.

Required: Prepare, with supporting analysis, all relevant tax entries for 2020

Current tax reconciliation:

Deferred Tax Analysis:

Item

GAAP Balance 31/12/20

Tax ‘Balance’ 31/12/20

Temp. Diff FT/FD

Ending DTA/DTL

Begin DTA/DTL

Adjustment