On January 1, 2010, Drugz Inc., a large pharmaceutical company, commenced business operations in Canada. The following information is available:

	20X4	20X5	20X6	20X7
Reported Income (loss) before tax	$250,000	225,000	$115,000	($900,000)
Tax rate - enacted in each year	30%	30%	36%	36%
Depreciation	$400,000	$400,000	$400,000	$400,000
Capital cost allowance	$625,000	$625,000	$225,000	$225,000

Required:

Prepare journal entries to record all tax related effects for 20X6 and 20X7. All supporting calculations should be shown. Assume that the company carries back all its losses first. Further, it is judged more likely than not that the company will generate taxable incomes in future years.

HINT: Determining the taxable income would be very useful.