Blue Spruce Technologies Inc. held a portfolio of shares and bonds that it accounted for using the fair value through other comprehensive income model at December 31, 2020. This was the first year that Blue Spruce had purchased investments. In part due to Blue Spruces inexperience, by December 31, 2020, the market value of the portfolio had dropped $28,100 below its original cost. Blue Spruce recorded the necessary adjustments at December 31, 2020 and was determined to hold the securities until the unrealized loss of 2020 could be recovered. By December 31, 2021, Blue Spruces goals of recovery had been realized and the original portfolio of shares and bonds had a fair market value $6,300 higher than the original purchase costs. Blue Spruces income tax rate is 30% for all years. Assume that any gains that will ultimately be realized on the sale of the shares and bonds are taxable as ordinary income when they are realized. Blue Spruce applies IFRS.

(a)

Prepare the journal entries at December 31, 2020 to accrue the unrealized loss on Blue Spruces securities and the related income tax. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020
	(To record fair value adjustment)
December 31, 2020
	(To record deferred taxes on fair value adjustment)

The accounting for the items in the numbered list that follows is commonly different for financial reporting purposes than it is for tax purposes.

(a)

Match each item in the following list to the number that best describes it:

i.		A reversing difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred tax asset
ii.		A reversing difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred tax liability
iii.		A permanent difference

1.		For financial reporting purposes, the straight-line depreciation method is used for plant assets that have a useful life of 10 years. For tax purposes, the CCA declining-balance method is used with a rate of 20%. (ignore the half-year rule.)		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
2.		A landlord collects rents in advance. Rents are taxable in the period when they are received.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
3.		Non-deductible expenses are incurred in obtaining income that is exempt from taxes.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
4.		Costs of guarantees and warranties are estimated and accrued for financial reporting purposes.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
5.		Instalment sales are accounted for by the accrual method for financial reporting purposes and the cash basis for tax purposes.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
6.		For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes but the assets lives are shorter for tax purposes.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
7.		Pension expense is reported on the income statement before it is funded. Pension costs are deductible only when they are funded.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
8.		Proceeds are received from a life insurance company because of the death of a key officer. (The company carries a policy on key officers.)		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
9.		The company reports dividends received from taxable Canadian corporations as investment income on its income statement, even though the dividends are non-taxable.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
10.		Estimated losses on pending lawsuits and claims are accrued for financial reporting purposes. These losses are tax deductible in the period(s) when the related liabilities are settled.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
11.		Security investments accounted for using the FV-NI model are adjusted at the end of the year to their fair value. This is the first year that the company has such investments and the fair value is lower than the cost.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability
12.		An impairment loss is recorded for goodwill in the current accounting period.		A Permanent DifferenceDeferred Tax AssetDeferred Tax Liability