Reference no: EM132549146

Dragonite Ltd. had accounting income of $156,000 in 2018. Within this accounting income figure is the CEO's life insurance expense of $5,000, which is not deductible for tax purposes. In addition, the undepreciated capital cost (UCC) for tax purposes is $14,000 lower than the net carrying amount of the property, plant, and equipment, although the amounts were equal at the beginning of the year.

Required:

Question 1: What is Dragonite's journal entry to record 2018 taxes, assuming IFRS was used and a tax rate of 25%.

Smash-IT, a maker of children's toys, incurred a net operating loss of $580,000 in 2018. Combined income for 2015, 2016, and 2017 was $460,000. The tax rate for all years is 30%.

Required:

Question 2: What are the journal entries to record the benefits of the carryback and the carryforward, assuming it is more likely than not that the benefits of the loss carryforward will be realized.