Question

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

		Accounting				Tax
Year		Income (Loss)				Rate
2015		$71,000				25%
2016		27,000				25%
2017		61,000				25%
2018		79,000				30%
2019		(220,000	)			35%
2020		72,000				30%
2021		89,000				25%

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

Assume Bridgeport 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 Bridgeport 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.)

Year	Account Titles and Explanation	Debit	Credit
2019	Current Tax ExpenseCurrent Tax BenefitFuture Tax ExpenseIncome Tax Receivable-2016Income Tax Receivable-2017Future Tax BenefitAllowance to Reduce Future Tax Asset to Expected Realizable ValueIncome Tax PayableIncome Tax Receivable-2018Future Tax AssetNo Entry
	Allowance to Reduce Future Tax Asset to Expected Realizable ValueFuture Tax AssetIncome Tax Receivable-2017Income Tax Receivable-2018Future Tax BenefitFuture Tax ExpenseIncome Tax PayableIncome Tax Receivable-2016Current Tax ExpenseNo EntryCurrent Tax Benefit
	Future Tax BenefitNo EntryIncome Tax Receivable-2017Income Tax Receivable-2018Future Tax AssetCurrent Tax ExpenseCurrent Tax BenefitAllowance to Reduce Future Tax Asset to Expected Realizable ValueIncome Tax Receivable-2016Income Tax PayableFuture Tax Expense
	Current Tax BenefitIncome Tax PayableFuture Tax AssetIncome Tax Receivable-2018Current Tax ExpenseIncome Tax Receivable-2017Future Tax ExpenseIncome Tax Receivable-2016Future Tax BenefitAllowance to Reduce Future Tax Asset to Expected Realizable ValueNo Entry
	(To record benefit from loss carryback)
2019	Income Tax Receivable-2016Income Tax PayableAllowance to Reduce Future Tax Asset to Expected Realizable ValueFuture Tax ExpenseIncome Tax Receivable-2018No EntryFuture Tax AssetCurrent Tax ExpenseCurrent Tax BenefitIncome Tax Receivable-2017Future Tax Benefit
	Future Tax AssetFuture Tax ExpenseAllowance to Reduce Future Tax Asset to Expected Realizable ValueCurrent Tax BenefitNo EntryIncome Tax Receivable-2016Income Tax PayableIncome Tax Receivable-2017Income Tax Receivable-2018Current Tax ExpenseFuture Tax Benefit
	(To record future benefit from loss carryforward)
2020	Income Tax Receivable-2016Current Tax ExpenseAllowance to Reduce Future Tax Asset to Expected Realizable ValueFuture Tax BenefitIncome Tax Receivable-2017Future Tax ExpenseNo EntryIncome Tax Receivable-2018Income Tax PayableFuture Tax AssetCurrent Tax Benefit
	Current Tax BenefitAllowance to Reduce Future Tax Asset to Expected Realizable ValueFuture Tax AssetFuture Tax ExpenseIncome Tax Receivable-2016No EntryFuture Tax BenefitCurrent Tax ExpenseIncome Tax PayableIncome Tax Receivable-2017Income Tax Receivable-2018
	(To record current tax expense)
2020	Future Tax BenefitNo EntryFuture Tax ExpenseIncome Tax Receivable-2018Income Tax Receivable-2017Current Tax BenefitIncome Tax PayableCurrent Tax ExpenseFuture Tax AssetIncome Tax Receivable-2016Allowance to Reduce Future Tax Asset to Expected Realizable Value
	Future Tax BenefitNo EntryAllowance to Reduce Future Tax Asset to Expected Realizable ValueFuture Tax AssetIncome Tax Receivable-2017Current Tax BenefitIncome Tax PayableCurrent Tax ExpenseFuture Tax ExpenseIncome Tax Receivable-2018Income Tax Receivable-2016
	(To record future tax expense)
2021	No EntryIncome Tax Receivable-2017Current Tax ExpenseIncome Tax Receivable-2018Income Tax PayableCurrent Tax BenefitFuture Tax ExpenseFuture Tax BenefitFuture Tax AssetAllowance to Reduce Future Tax Asset to Expected Realizable ValueIncome Tax Receivable-2016
	Future Tax BenefitCurrent Tax ExpenseIncome Tax Receivable-2018Future Tax ExpenseIncome Tax PayableAllowance to Reduce Future Tax Asset to Expected Realizable ValueCurrent Tax BenefitFuture Tax AssetIncome Tax Receivable-2017No EntryIncome Tax Receivable-2016
	(To record income taxes)

Answer 1

(a)

2019

Income Tax Receivable2016 6,750

($27,000 X 25%)

Income Tax Receivable2017 15,250

  ($61,000 X 25%)

Income Tax Receivable—2018 23,700

   ($79,000 X 30%)

Current Tax Benefit 45,700

Note: An acceptable alternative is to record only one Income Tax Receivable account for the amount of $45,700.

Future Tax Asset 15,900

Future Tax Benefit 15,900

  ($220,000 – $27,000 – $61,000 – $79,000 = $53,000)

  ($53,000 X 30% = $15,900)

2020

Current Tax Expense 5,700

Income Tax Payable  5,700

  [($72,000 – $53,000) X 30%]

Future Tax Expense 15,900

Future Tax Asset 15,900

($15,900 $0)

2021

Current Tax Expense 22,250

Income Tax Payable ($89,000 X 25%) 22,250