Question: Case Study 2 Sydney Ltd reported a profit before tax for the year ended 30 June 2023 of $ X (You will be advised of
Case Study 2 Sydney Ltd reported a profit before tax for the year ended 30 June 2023 of $ X (You will be advised of the amount to use during the workshop). It included the following revenue and expense items:
Doubtful debts expense $ 4,000
Depreciation expense 10,000
Entertainment expense $ 2,200
Wages expense 33,000
The draft statement of financial position as at 30 June 2023 included the following assets and liabilities:
| 2023 ($) | 2022 ($) | |
| Cash | 5000 | 4400 |
| Account receivable | 68000 | 61000 |
| Allowance for doubtful debts | (7000) | (4000) |
| Machinery-at cost | 120000 | 80000 |
| Accumulated deprecation | (50000) | (40000) |
| Wages payable | 2200 | 3700 |
| Deferred tax assets | ? | 3510 |
| Deffered yax liability | ? | 12000 |
Additional information: $96,600 accounting profit
1. The machinery was purchased on 1 July 2017. Sydney1 Ltd claims tax depreciation on the machinery at the rate of 20% per year using the straight line method On 1 January, 2023, additional new machinery was acquired due to the expansion of the business; There have been no disposals of machinery during the year.
2. The company has $4,000 in tax losses carry forward from 2022. A deferred tax asset was recognised for these losses.
3. The corporate tax rate is 30%.
Required:
A. Prepare the current tax worksheet for Sydney Ltd and the related tax journal entries for 30 June 2023. All workings must be clearly shown. (10 marks)
B. Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts. All workings must be clearly shown. (10 marks)
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