Year 1 Year 2 Year 3

Accounting Income (loss) $150,000 $330,000 $(550,000)

A Capital Asset was purchased on January 1 of year 1 at a cost of $90,000.

Depreciation is $15,000 per year.

CCA is $17,000 in year 1, $16,000 in year 2 and $10,000 in year 3.

Warranty expense accrued on the financial statements is as follows: $8,000 in year 1,

$10,000 in year 2 and $9,000 in year 3.

Actual warranty claims paid is as follows: $5,000 in year 1, $11,000 in year 2 and $12,000 in year 3.

Golf Dues equal to $10,000 was paid in year 2 and golf dues of 10,800 was paid in year 3. There were no golf dues in year 1.

Tax rates are 35% in year 1, 37% in year 2 and 30% in year 3.

Assume that it is probable that the loss carry forward will be used in the future years.

Required:

1. Prepare a tax reconciliation for all three years.

2. Prepare the tax journal entries for all three years assuming IFRS. Show Calculations.

3. Assume the company had Taxable Income equal to $21,800 in year 4. Assume no adjustment is required for Temporary differences. What would be the Income Tax journal entries required in year 4? Assume year 4 had a tax rate of 28%.

4. Prepare the Loss Note disclosure required for Year 3.