Mister Malcontent Ltd?s profit before tax for the year ended 30 June 2017 was $252 450. Included in this profit are the following items of income and expense:

At 30 June, the company?s draft statements of financial position showed the following balances:

Additional information

? A tax deduction for development expenditure of 125% of the $120 000 spent during the year is available under income tax legislation. The profit before tax reflects the amount of development costs amortized in the current period.

? All equipment was purchased on 1 July 2014. The tax depreciation rate for equipment is 20%. The equipment sold on 30 June 2017 cost $66 667.

? Rent is assessed for tax when received in cash.

? The company pays tax in quarterly installments. The following payments were made during the year ended 30 June 2017.

28 July 2016 (Final payment for 30 June 2016)????? $12 500

28 October 2016 (1st payment for 30 June 2017) ?????8 420

28 February 2017 (2nd payment for 30 June 2017) ?????9 380

28 April 2017 (3rd payment for 30 June 2017?????9 750

? The company tax rate applicable for the year ended 30 June 2016 was 34%, but as a result of the government?s taxation reform package the company tax rate dropped to 30% effective from 1 July 2016. No entry has yet been made in the current period for the change in tax rates.

A. Prepare the current tax worksheet to determine taxable income and calculate the current tax liability for the year ended 30 June 2017 (show all workings).

B. Prepare the journal entries relevant to current tax for the year.

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Amortisation of development costs Depreciation expense - equipment (15%) Entertainment expense Insurance expense Doubtful debts expense Proceeds on sale of equipment Carrying amount of equipment sold Rent revenue Annual leave expense Royalty revenue (non-assessable) $30 000 40 000 12 450 24 000 14 000 30 000 36 667 25 000 54 000 2 000 MISTER MALCONTENT LTD Statement of Financial Position (Extract) as at 30 June Assets Cash Accounts receivable Allowance for doubtful debts Inventories Prepaid insurance Rent receivable Development costs Accumulated amortisation Equipment Accumulated depreciation Deferred tax asset Liabilities Accounts payable Provision for annual leave Mortgage loan Deferred tax liability Current tax liability 2017 $ 55 000 295 000 (16 000) 162 000 30 000 3 500 120 000 (30 000) 200 000 (90 000) ? 310 500 61 000 100 000 ? ? 2016 $ 65 000 277 000 (18 000) 185 000 25 000 5 500 266 667 (80 000) 28 220 294 000 65 000 150 000 19 437 12 500 Amortisation of development costs Depreciation expense - equipment (15%) Entertainment expense Insurance expense Doubtful debts expense Proceeds on sale of equipment Carrying amount of equipment sold Rent revenue Annual leave expense Royalty revenue (non-assessable) $30 000 40 000 12 450 24 000 14 000 30 000 36 667 25 000 54 000 2 000 MISTER MALCONTENT LTD Statement of Financial Position (Extract) as at 30 June Assets Cash Accounts receivable Allowance for doubtful debts Inventories Prepaid insurance Rent receivable Development costs Accumulated amortisation Equipment Accumulated depreciation Deferred tax asset Liabilities Accounts payable Provision for annual leave Mortgage loan Deferred tax liability Current tax liability 2017 $ 55 000 295 000 (16 000) 162 000 30 000 3 500 120 000 (30 000) 200 000 (90 000) ? 310 500 61 000 100 000 ? ? 2016 $ 65 000 277 000 (18 000) 185 000 25 000 5 500 266 667 (80 000) 28 220 294 000 65 000 150 000 19 437 12 500

Answer rating: 100% (QA)

A Current Tax Worksheet For year ended 30 June 2017 Accounting profit before income tax 252 450 Add Entertainment expense nondeductible 12 450 Amortis... View the full answer