Assume that in 2021, as a result of the pandemic, MRI incurred a loss for accounting purposes of $400,000 and an operating tax loss of $380,000.

PART C (8 marks):

Assume that in 2021, as a result of the pandemic, MRI incurred a loss for accounting purposes of $400,000 and an operating tax loss of $380,000. The difference between accounting loss and tax loss is as a result of impairments taken on PPE during the year. The tax rate in 2021 was 20%. In the last two years, there has been a 5% decrease in the tax rates each year as a result of the current economic situation. The tax rate is expected to remain the same in 2022.

Last year, in 2020, MRI incurred losses also due to the pandemic which were carried back and used to offset 2017’s taxable income. In 2019 and 2018 reported taxable income of $110,000 and $150,000, respectively.

MRI’s policy is to carry losses to the earliest year possible. Assume it is probable that any losses remaining will be able to be used.

Required:

Prepare all the necessary journal entries required to record income taxes for MRI for 2021.

If applicable, please show all journal entries separately and show your work. (to maximize part marks if necessary)