Roger Ltd. commences operations on 1 July 2018. On the same date, the company purchases a machine for $900 000. The expected useful life of the machinery is four years. The machinery has no residual value at the end of four years.

For accounting purposes, the depreciation expense would be $225 000 per year and for taxation purposes, the ATO allows the company to depreciate the asset over three yearsthat is, $300,000 per year. The profit before tax for each of the next four years (years ending 30 June) is $600 000, $700 000, $800 000, and $900 000 respectively. The tax rate is 30 per cent.

Required:

1. Calculate the taxable profit at 30 June 2019, 2020, 2021 and 2022. (15 marks)

2. Calculate the deferred tax liability and prepare the necessary journal entries at 30 June 2019, 2020, 2021 and 2022. (15 marks)

Answer rating: 100% (QA)

1 Taxable Profit Calculation Taxable profit is calculated by adjusting the accounting profit for tax ... View the full answer