Red Hill Ltd had a tax loss of $10,100 for the year ended 30 June 2019....

  

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Red Hill Ltd had a tax loss of $10,100 for the year ended 30 June 2019. The financial statements of Red Hill Ltd for the year ended 30 June 2020 showed a profit before tax of $50,000, including the following items of income and expense: Additional Information for 30 June 2020: ● ● (c) Impairment of goodwill Depreciation expense - equipment Bad debts expense Long service leave expense Insurance expense Required: (a) 6,000 30,000 3,200 8,000 1,000 The tax deduction for equipment depreciation was $40,000. The balance in the Allowance for Doubtful Debts account at 30 June 2019 was $7,500, and at 30 June 2020 the balance in the account was $5,000. Long service leave costs of $12,000 had been paid during the current year. The balance of the Prepaid Insurance account at 30 June 2019 was $2,400, and the balance in the account at 30 June 2020 was $1,800. The tax rate is 30%. Prepare the complete current tax worksheet for the year ended 30 June 2020 and the journal entries to record current tax (and/or deferred tax). Narrations are not required. (b) A depreciable non-current asset, with differing depreciation rates for accounting and tax purposes, can lead to the recognition of either a Deferred Tax Asset or a Deferred Tax Liability. In each case, explain how the Deferred Tax Asset and Deferred Tax Liability is created. Explain how the Development Costs account can lead to the recognition of a Deferred Tax Liability. Red Hill Ltd had a tax loss of $10,100 for the year ended 30 June 2019. The financial statements of Red Hill Ltd for the year ended 30 June 2020 showed a profit before tax of $50,000, including the following items of income and expense: Additional Information for 30 June 2020: ● ● (c) Impairment of goodwill Depreciation expense - equipment Bad debts expense Long service leave expense Insurance expense Required: (a) 6,000 30,000 3,200 8,000 1,000 The tax deduction for equipment depreciation was $40,000. The balance in the Allowance for Doubtful Debts account at 30 June 2019 was $7,500, and at 30 June 2020 the balance in the account was $5,000. Long service leave costs of $12,000 had been paid during the current year. The balance of the Prepaid Insurance account at 30 June 2019 was $2,400, and the balance in the account at 30 June 2020 was $1,800. The tax rate is 30%. Prepare the complete current tax worksheet for the year ended 30 June 2020 and the journal entries to record current tax (and/or deferred tax). Narrations are not required. (b) A depreciable non-current asset, with differing depreciation rates for accounting and tax purposes, can lead to the recognition of either a Deferred Tax Asset or a Deferred Tax Liability. In each case, explain how the Deferred Tax Asset and Deferred Tax Liability is created. Explain how the Development Costs account can lead to the recognition of a Deferred Tax Liability.

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a WORKSHEET FOR CURRENT YEAR ENDED 30 JUNE 2020 Taxable Income 50000 Less Depreciation expense equip... View the full answer