Assume that by 1 December 2020 there was a change in the tax rate. With reference to AASB112 Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax liability balances as of 1 December 2020 following a lower tax threshold for the 2020-2021 financial year. Prepare the journal entries to record the effect of change in the tax rate.

  

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Background infomation The profit before tax, reported in the statement of comprehensive income of SuperX Ltd for the year ended 30 June 2020 amounted to: 16,340,000 Subscription revenue Government award income Doubtful debts expense 510,000 919.000 102,000 Depreciation (Equipment) Depreciation (Buildings) 663,800 163,000 Maintenance expense 459,000 Employee benefits expense Rent expense Entertainment expense 306,000 153,000 255,300 The draft statements of financial position of the company at 30 June 2020 and 2019 showed the following assets and liabilities: 2020 ($) 2019 ($) Assets Cash 1,072,000 1,174,000 Inventory Accounts receivable Allowance for doubtful debts 2,297,000 2,093,000 6,638,000 6,331,000 (531,000) (490,000) Prepaid rent Equipment Accumulated depreciation Equipment 285,000 265,000 6,638,000 (3,319,000) 6,638,000 (2,655,200) Buildings 4,085,000 4,085,000 Accumulated depreciation Buildings Land Goodwill (net) (1,634,000) (1,470,000) 2,553,000 1,021,000 2,553,000 1,021,000 Deferred tax asset 51,720 Liabilities Accounts payable 3,880,000 3,472,000 Provision for maintenance 817,000 612,000 Provision for employee benefits 561,000 408,000 Subscription received in advance Deferred tax liability 357,000 255,000 Additional Infomation: Subscription revenue is tax assessable when it is received in cash Government award income is not tax assessable Doubtful debts are tax deductible when the company actually incurs bad debts/write off For accounting purpose, the equipment is depreciated using the annual straight line method at a rate of: 10% For tax purpose, however, the equipment is depreciated using the annual straight line method at a rate of: 15% Depreciation of buildings is not allowed as tax deductions and goodwill is not tax assessable Employee benefits are tax deductible when they are paid in cash to the employees Rent expense and maintenance expense are tax deductible when paid in cash Entertainment expense is not allowed as tax deduction Assume a tax rate for the financial years ending 30 June 2019 and 2020 to be: 30% Required: Calculate the taxable income/tax loss and the current tax liability (if any) for the financial year ended 30 June 2020. Prepare a journal entry to recognise the current tax liability/tax loss. Calculate deferred tax asset and deferred tax liability balances as at 30 June 2020. Prepare the deferred tax jounal entries for the year ended 30 June 2020. Note that you are NOT required to prepare journals to offset the deferred tax asset and deferred tax liability balances. Show your calculation using deferred tax worksheets by creating separate columns for: carrying amount, tax base, taxable temporary differences and deductible temporary differences. Assume that by 1 December 2020 there was a change in tax rate to: With reference to AASB112 Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax liability 27.50% balances as at 1 December 2020 following a lower tax threshold for the 2020-2021 financial year. Prepare the joumal entries to record the effect of change in tax rate. Background infomation The profit before tax, reported in the statement of comprehensive income of SuperX Ltd for the year ended 30 June 2020 amounted to: 16,340,000 Subscription revenue Government award income Doubtful debts expense 510,000 919.000 102,000 Depreciation (Equipment) Depreciation (Buildings) 663,800 163,000 Maintenance expense 459,000 Employee benefits expense Rent expense Entertainment expense 306,000 153,000 255,300 The draft statements of financial position of the company at 30 June 2020 and 2019 showed the following assets and liabilities: 2020 ($) 2019 ($) Assets Cash 1,072,000 1,174,000 Inventory Accounts receivable Allowance for doubtful debts 2,297,000 2,093,000 6,638,000 6,331,000 (531,000) (490,000) Prepaid rent Equipment Accumulated depreciation Equipment 285,000 265,000 6,638,000 (3,319,000) 6,638,000 (2,655,200) Buildings 4,085,000 4,085,000 Accumulated depreciation Buildings Land Goodwill (net) (1,634,000) (1,470,000) 2,553,000 1,021,000 2,553,000 1,021,000 Deferred tax asset 51,720 Liabilities Accounts payable 3,880,000 3,472,000 Provision for maintenance 817,000 612,000 Provision for employee benefits 561,000 408,000 Subscription received in advance Deferred tax liability 357,000 255,000 Additional Infomation: Subscription revenue is tax assessable when it is received in cash Government award income is not tax assessable Doubtful debts are tax deductible when the company actually incurs bad debts/write off For accounting purpose, the equipment is depreciated using the annual straight line method at a rate of: 10% For tax purpose, however, the equipment is depreciated using the annual straight line method at a rate of: 15% Depreciation of buildings is not allowed as tax deductions and goodwill is not tax assessable Employee benefits are tax deductible when they are paid in cash to the employees Rent expense and maintenance expense are tax deductible when paid in cash Entertainment expense is not allowed as tax deduction Assume a tax rate for the financial years ending 30 June 2019 and 2020 to be: 30% Required: Calculate the taxable income/tax loss and the current tax liability (if any) for the financial year ended 30 June 2020. Prepare a journal entry to recognise the current tax liability/tax loss. Calculate deferred tax asset and deferred tax liability balances as at 30 June 2020. Prepare the deferred tax jounal entries for the year ended 30 June 2020. Note that you are NOT required to prepare journals to offset the deferred tax asset and deferred tax liability balances. Show your calculation using deferred tax worksheets by creating separate columns for: carrying amount, tax base, taxable temporary differences and deductible temporary differences. Assume that by 1 December 2020 there was a change in tax rate to: With reference to AASB112 Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax liability 27.50% balances as at 1 December 2020 following a lower tax threshold for the 2020-2021 financial year. Prepare the joumal entries to record the effect of change in tax rate.

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Computation of taxable incomeTax loss for the year ended 3062020 Particulars Value Profit as per BOA 16340000 Add back Doubtful debt expense 102000 De... View the full answer