The accounting profit before tax for the year ended 30 June 2023 for Augusta Ltd amounted to $28 500 and included the below:

Depreciation expenses - motor vehicles (25% p.a, straight line) $4500

Depreciation expenses- equipment(20% p.a , straight-line) 20000

rent revenue 16000

royalty revenue ( non taxable ) 5000

doubtful debts expenses 2300

Entertainment expense 1500

Annual leave expenses 5000

Gain on sale of equipment 1000

The draft statement of financial position at 30 June 2023 contained the following assets and liabilities.

	2023	2022
Assets	$13200	$9800
cash	1200	14000
Allowance for doubtful debts	(3000)	(2500)
Inventories	19000	21500
Rent receivable	2800	2400
motor vehicles	18000	1800
Accumulated depreciation- motor vehicle	(15750)	(11250)
Equipment	100000	130000
Accumulated depreciation- equipment	(60000)	(52000)
deferred tax assets	?	6450
Liabilities
Account payable	15655	21500
provision for annual leave	4500	6000
current tax liability	?	8200
deferred tax liability	?	3445

Additional information

• The motor vehicle is fully depreciated for tax purposes.

• The company claims tax depreciation on equipment at the rate of 15% p.a. The sale of equipment on which a gain was recognised (see the previous point) was the only movement in the equipment account during the year and took place on 1 July 2022.

• The income tax rate is 30%.

Required:

1. Prepare the current tax worksheet and the journal entry to recognise the current tax as at 30 June 2023.

2. Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts at 30 June 2023.

3. Prepare T accounts for the following three items: Rent receivable, Allowance for doubtful debts; Provision for annual leave.

4. Explain how a change in the tax rate will impact the balances of deferred tax assets and deferred tax liabilities? Should any such change be reflected in the reported profit of the reporting entity when the tax rate changes? (Word limit – 300 words – use references where appropriate.

Answer rating: 100% (QA)

Here are the solutions to the required questions 1 Current tax worksheet Accounting profit before ta... View the full answer