On January 1, 2016, Drugz Inc., a large pharmaceutical company, commenced business operations in Canada. The following information is available: 2018 2019 2020 2021 Reported Income (loss) before tax $250,000 $225,000 $115,000 ($900,000) Tax rate - enacted in each year 30% 30% 36% 36% Depreciation $400,000 $400,000 $400,000 $400,000 Capital cost allowance $625,000 $625,000 $225,000 $225,000 The tax rates for any given year is known by the company during the previous year. Thus for example, the tax rate for 2020 will be known during 2021. Assume that the company carries back all its losses first. Further in 2021, it is judged more likely than not that the company will generate taxable incomes in future years. 

Required: 1. Prepare journal entries to record all tax related effects for 2020 and 2021. All supporting calculations should be shown.

Answer rating: 100% (QA)

To prepare the journal entries for the taxrelated effects in 2020 and 2021 we need to consider the r... View the full answer