Reference no: EM132968299

Apa Solo Inc. follows IFRS and reported the following taxable incomes/losses and tax rates for the first five years ended December 31:

General Information
2016: Taxable income (loss) = $50,000 Tax rate = 25%
2017: Taxable income (loss) = (400,000) Tax rate = 40%
2018: Taxable income (loss) = $100,000 Tax rate = 34%
2019: Taxable income (loss) = $230,000 Tax rate = 34%
2020: Taxable income (loss) = $620,000 Tax rate = 42%
Capa Solo Inc. had decided to always first carryback losses in any given year before carrying them forward. All tax rate changes were enacted as of the beginning of the year and these rates were not known until the year of change.

Problem 1: For the loss of 2017 that is carried forward, prepare the related journal entry/entries required to be made in 2018, 2019 and 2020.

Problem 2: ignore the information on the amount of taxable loss given in the problem for 2017. Instead, now assume that Mortel decided that it was possible all of the losses would be used within the carryforward period and that in 2017 they correctly set up an asset of $408,000 to recognize this loss carry forward after carrying back the maximum loss possible to 2016. Also assume the 2018 tax rate was known in 2017. How much was the taxable loss in 2017?