Simone Corp. was incorporated on January 1, 2020. For the year ended December 31, 2020, Simone Corp.s
Question:
Simone Corp. was incorporated on January 1, 2020. For the year ended December 31, 2020, Simone Corp.’s taxable income was $105,000. There were no temporary differences. Income tax paid was $31,500. Additional information pertaining to income taxes for the year ended December 31, 2021, follows:
■ Simone Corp. suffered a loss before income taxes of $210,000.
■ Depreciation expense was $50,000. Capital cost allowance was not claimed given the loss situation.
■ Meal and entertainment expenses for the year were $8,000. Only $4,000 of this expense is deductible for tax purposes.
■ Simone Corp. expensed $10,000 on life insurance policies for its key personnel. This expense is not deductible for tax purposes.
■ On January 1, 2021, the government increased the income tax rate to 35% effective immediately and announced that it would increase to 40% effective January 1, 2022.
■ Management elects to carry back the loss to the greatest extent possible and anticipates that it will use 100% of the loss carryforward within the allowable carryforward period.
Required:
Prepare the journal entries to record income tax expense for the year.
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