The following information has been provided in relation to Jennifer Ltd: 1. The company recorded a profit
Question:
The following information has been provided in relation to Jennifer Ltd:
1. The company recorded a profit before tax for the 2016–17 period of $120 000.
2. At 30 June 2017, the company’s plant is carried at cost of $200 000, with accumulated depreciation of $80 000. Depreciation of $40 000 was recognized as an expense in the 2016–17 period. The tax deduction allowed in that year is $50 000, resulting in a carrying amount of plant for tax purposes at 30 June 2017 of $90 000. No acquisitions or disposals of plant occurred during the 2016–17 period.
3. At 30 June 2016, the company reported an accounts receivable balance of $140 000, with a balance in the allowance for doubtful debts of $20 000. In December 2016, the company wrote $15 000 of the accounts receivable off as bad debts, adjusting the allowance for doubtful debts. In the statement of financial position at 30 June 2017, the company reported an accounts receivable balance of $160 000 with a related allowance for doubtful debts of $12 000.
4. As a part of its sales strategy, the company offers a 2-year warranty on its products. At 30 June 2016, the balance in the provision for warranty was $40 000. In the 2016–17 period, because of a fault in the materials supplied, there was an unusual number of claims under the warranty, these amounting to $30 000. In anticipation of future claims, the company reported a provision for warranty payable of $60 000 at 30 June 2017.
5. The company pays its insurance for the following 12 months in May each year. On 1 May 2017, the amount paid was $21 000, compared with $18 000 in the previous year. Tax deductions for insurance occur with the cash payment.
6. The company buys inventory on a 30-day credit arrangement. The accounts payable of $30 000 at 30 June 2017 was only marginally higher than the $28 000 balance one year earlier.
7. During the 2016–17 period, the company incurred $20 000 worth of entertainment expenses, which was higher than the previous year expense of $15 000. These expenses are non-deductible for tax purposes.
8. No other assets and liabilities have tax consequences. The tax rate is 30%.
A. Prepare the current tax worksheet for the year ended 30 June 2017 and the entries to record the current tax.
B. Prepare the deferred tax worksheet as at 30 June 2016 to determine the beginning balances for deferred tax liability and deferred tax asset.
C. Prepare the deferred tax worksheet as at 30 June 2017 and the entries to record the deferred tax for the year.
Accounting Business Reporting for Decision Making
ISBN: 9780730302414
4th edition
Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver