Reference no: EM132593282

Question - Sabbie Corporation, incorporated in 2018 had the following data.

	2018	2019
Accounting income before tax:	$210,000	$270,000
Items included in arriving at income before tax:
Golf dues	8,000	9,000
Dividends received from a Canadian corp.	20,000	60,000
Depreciation expense	100,000	100,000
Warranty expense	50,000	60,000
Additional information:
Capital cost allowance	150,000	160,000
Warranty costs paid for	30,000	70,000

The tax rate in effect is 32% for 2018 and 35% for 2019.

Required -

a) Prepare tax reconciliation for 2018 and 2019. ie. Calculate taxable income and tax payable.

b) Prepare journal entries for 2018 and 2019.

c) Prepare partial balance sheet for 2018 and 2019.

d) Prepare the Income Tax Expense disclosure required on the Income Statement for 2018 and 2019.

e) Assume that in 2020 (the following year), the taxable loss was $475,000. What would be the journal entry to record the loss carryback and carryforward, assuming management estimates that it is probable that the loss carryforward will be used. Assume the 2020 tax rate is 30%.