Question
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
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started