Reference no: EM132966984

Patties Industries 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%

• Patties Industries 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.

Required:

Problem 1) Prepare the journal entry/entries on December 31, 2017 to record only the loss carryback and/or loss carryforward for the loss in 2017. Assume there are no uncertainties about the realization of the net loss reported on December 31, 2017 and that it was more likely than not for it to generate profits in the years following any loss.