Question

Hello,

I have an accounting question

Pronghorn Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Pronghorn Inc. follows IFRS.

Year		Accounting Income (Loss)				Tax Rate
2020		$134,000				18%
2021		98,000				18%
2022		(322,000)	)			16%
2023		234,000				16%

The tax rates were all enacted by the beginning of 2020.

Prepare the journal entries for the years 2020 to 2023 to record income taxes, assuming the tax loss is first carried back and that at the end of each year, the loss carryforward benefits are judged more likely than not to be realized in the future. (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. Record journal entries in the order presented in the problem.)

Date

Date

Date

(To record benefit from loss carryback.)

Date

(To record deferred tax benefit from loss carryforward.) Date (To record current tax expense.) (To record deferred tax expense.)

Answer 1

Year	Account title and explanation	Debit $	Credit $
2020	Current tax expense	24,120
	Income Tax Payable		24,120
	(To record Income tax expense for year 2020 (134,000 x 18%))
2021	Current tax expense	17,640
	Income Tax Payable		17,640
	(To record Income tax expense for year 2021 (98,000 x 18%))
2022	No entry for current tax expense
2022	Deferred Tax Asset	37,440
	Deferred tax Benefit		37,440
	(To record Deferred tax benefit for loss carry forwarded (234,000 x 16%)
	(There is loss of $ 322,000 for the year 2022 but the deferred tax asset will be created to the extend of loss that can be set of against future profit. Therefore deferred tax asset created only to the extend of profit of 2023 .)
2023	No entry for current tax expense
2023	Deferred tax expense	37,440
	Deferred tax Asset		37,440
	(To record Deferred tax expense for year 2023 (234,000 x 16%))