The accounting profit before tax of Raffles Ltd for the year ended 30 June 2019 was $1,250,000 and included the following items of income and expense: 

Government grant 50,000

 Rent revenue 80,000 

Political donations 20,000 

Bad debts expense 7,500

 Depreciation of plant 280,000 

Insurance expense 24,000

 Long service leave expense 40,000 

Warranty expense 30,000 

The draft statements of financial position at 30 June 2019 and 30 June 2018 included the following assets and liabilities:

2019                 2018 

$ $ Accounts Receivable 535,000          485,000 

Allowance for doubtful debts (84,000) (80,000) 

Prepaid insurance 15,000 12,000 

Plant 2,800,000 2,800,000 

Accumulated depreciation - plant (380,000) (100,000) 

Deferred tax asset ?25,000 

Rent received in advance 100,000 80,000 

Provision for Warranty 30,000 26,000 

Long service leave payable 14,000 21,000 

Deferred tax liability            ? 48,000

Additional information: 

1. For accounting purposes, the plant is depreciated at 10% straight line. For tax purposes, the plant is depreciated at 20% straight line. 

2. The tax rate is 30%. 

Required: 

a) Calculate the taxable income and hence the current tax liability for Raffles Ltd.  

b) Using the general journal, record the current tax liability for Raffles Ltd. as at 30 June 2019. 

c) Using an appropriate worksheet, calculate the balance day adjustments to deferred tax asset and deferred tax liability accounts as at 30 June 2019. (12 marks) d) Using the general journal, record the adjustments to deferred tax asset and deferred tax liability accounts as at 30 June 2019.

Answer rating: 100% (QA)

a Calculation of the taxable income and hence the current tax liability for Raffles Ltd Taxable Inco... View the full answer