Ropata Engineering Ltd began operations on 1 April 2021. The profit statement and statement of financial position at 31 March 2022 follow. These statements have been prepared for internal reporting purposes and show balances before any tax adjustments.

   

• Interest on the term deposit is regarded as an assessable income when received in cash.

• Accounts payable relates to inventory purchases from suppliers. The purchases are recognised as a tax deduction on an accrual basis.

• Entertainment expenses have a significant private element, so the Inland Revenue Department only allows a 50% deduction.

• The tax rate is 28%.

Task

i. Using a current tax worksheet and a deferred tax worksheet, determine balances for Ropata Engineering Ltd’s current tax liability, deferred tax liability and deferred tax asset. Prepare a journal entry to account for current tax and deferred tax in accordance with NZ IAS 12 Income Taxes.
 

 

Transcribed Image Text:

Ropata Engineering Ltd: Profit statement Sales Interest on fixed deposit Expenses Cost of goods sold Depreciation: Leasehold Improvements Depreciation: Plant & Equipment Entertainment expenses Bad and doubtful debt expense Rent expense Employee expenses Interest on loan expense Other expenses 11,000,000 2,000 5,500,000 90,000 500,000 8,000 14,000 350,000 2,000,000 40,000 600,000 11,002,000 9,102,000 1,900,000 Ropata Engineering Ltd: Profit statement Sales Interest on fixed deposit Expenses Cost of goods sold Depreciation: Leasehold Improvements Depreciation: Plant & Equipment Entertainment expenses Bad and doubtful debt expense Rent expense Employee expenses Interest on loan expense Other expenses 11,000,000 2,000 5,500,000 90,000 500,000 8,000 14,000 350,000 2,000,000 40,000 600,000 11,002,000 9,102,000 1,900,000

Answer rating: 100% (QA)

Deferred Tax The concept of deferred tax arises from the temporary differences between the book or a... View the full answer