Question
GudVotez, Ltd. , follows IFRS and reported the following amounts and information for the three years ended December 31: GENERAL INFORMATION 2018 2019 2020 Accounting
GudVotez, Ltd., follows IFRS and reported the following amounts and information for the three years ended December 31:
GENERAL INFORMATION
| 2018 | 2019 | 2020 |
Accounting income (loss) | $ 825,000 | (2,100,000) | $300,000 |
Accounting depreciation | 150,000 | 150,000 | 150,000 |
CCA allowed | 255,000 | 165,000 | 120,000 |
Tax rate | 25% | 30% | 33% |
Taxable incomes (losses) in the two years prior to 2018 were $0. Changes in tax rates were enacted only in the year of the tax change. Tax rates beyond 2020 are not expected to change. GudVotez management is confident that it is probable the company will be able to use the losses carried forward.
Required:
- Prepare the journal entries to record only the loss carryback and/or loss carryforward for the years 2018-2020. Journal entries for the timing differences related to property, plant and equipment in each year are not required to be made by you.
- For this Question Only, in addition to the information given above in the general section, assume also that the company had received rent in advance for six years in 2016 amounting to $36,000 in cash. From this amount, rent revenues for 2016 and 2017 were correctly recognized by the company. Note that for tax purposes any cash received for future rent services is taxed when the cash is received. The tax rates in both 2016 and 2017 were 20%. Determine the amounts to be reported for Deferred Taxes on the balance sheets ended December 31 for 2018 - 2020. Journal entries are not required.
- How would your answer change if it was expected that only 60% of the losses determined as per the assumptions in [1] above, would be used within the carryforward period. In 2020, it was still expected that 60% of the remaining unused loss carry forward from 2019 would be recovered in future years.
- For this Question, ignore the information on the amount of taxable loss given in the problem for 2019. Instead, now assume that GudVotez decided that it was possible all of the losses would be used within the carryforward period and that in 2019 they correctly set up an asset of $366,000 to recognize this loss carry forward after carrying back the maximum loss possible to 2018. Also assume the 2020 tax rate was known in 2019. How much was the taxable loss in 2019? How much was the accounting loss in 2019?
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