Question

Bramble Inc. reported the following accounting income (loss) and related tax rates during the years 2015 to 2021:

		Accounting				Tax
Year		Income (Loss)				Rate
2015		$72,000				25%
2016		25,000				25%
2017		58,000				25%
2018		79,000				30%
2019		(212,000	)			35%
2020		73,000				30%
2021		85,000				25%

Accounting income (loss) and taxable income (loss) were the same for all years since Bramble began business. The tax rates from 2018 to 2021 were enacted in 2018.

Assume Bramble Inc. follows ASPE for all parts of this question, except when asked about the effect of reporting under IFRS in part (b).

Prepare the journal entries to record income taxes for the years 2019 to 2021. Assume that Bramble uses the carryback provision where possible and expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year. (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.)

Show how the bottom portion of the income statement would be reported in 2019, beginning with “Loss before income tax.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Show how the bottom portion of the income statement would be reported in 2020, starting with “Income before income tax.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Prepare the journa

Assume now that Bramble uses a valuation allowance account along with its Future Tax Asset account. Identify which entries in the previous part of the question would differ and prepare them. (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.)


Indicate how the bottom portion of the income statements for 2019 and 2020 would be reported. Assume that Bramble uses the carryback provision where possible but is uncertain if it will realize the benefits of any loss carryforward in the future. Bramble does not use a valuation allowance. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)l entries for the years 2019 to 2021 to record income taxes, assuming that Bramble uses the carryback provision where possible but is uncertain if it will realize the benefits of any loss carryforward in the future. Bramble does not use a valuation allowance. (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.)

Answer 1

Year	particulars	Debit	Credit
2019	Income tax refund receivable accounts Dr. To Benefit due to Loss carry back accounts Cr.	$38,200	$38,200
	(Being benefits due to Loss carry back recorded )
2019	Deferred tax assets accounts Dr To surplus due to Loss carry forward accounts Cr.	$22,500	$22,500
	(Being Losses Carry forwarded and benefits recorded)
2020	Tax expenses Accounts Dr. To deferred tax assets accounts Cr To Income tax payables account Cr.	$21,900	$22,500 $(600) ​​​​​
	(Being Income tax payable sucessful)
2021	Income tax expenses Accounts Dr To Income tax payables account Cr	$21,250	$21,250
	(Being income tax paid and recorded)

Income statement of Bramble inc.

For the year 2019

Operating loss: $(212,000)

Benefits received:

Benefits due to Loss carry forward $38,200

Benefits due to Loss carry back $22,500

$60,700

Net Losses: $(151,300)

Statement of income for Bramble Inc.

For the year 2020

Operating Loss Before taxes $73,000

Tax expenses:

Current $(600)

Deferred $22,500

$21,900

Net Income: $94,900

The above tables shows the journal entries and income statements of Bramble Inc company.