The profit before tax, as reported in the Statement of Profit or Loss and Other Comprehensive Income
Question:
The profit before tax, as reported in the Statement of Profit or Loss and Other Comprehensive Income of Brass for the year ended 30 June 2020, amounted to $55,000 including the following revenue and expense items.
June 2020 | |
---|---|
$ | |
Insurance Expense | 6,000 |
Bad debts expense | 6,000 |
Depreciation expense - equipment | 7,000 |
Long Service Leave Expense | 5,000 |
Interest Expense | 4,500 |
Fines and Penalties (non-deductible) | 2,500 |
Entertainment Expense (non-deductible) | 4,500 |
Government grant (exempt from tax) | 10,000 |
The Statement of Financial Position of the company as at 30 June 2020 showed the following assets and liabilities.
2020 | 2019 | |
---|---|---|
Assets | $ | $ |
Cash | 15 000 | 12 500 |
Accounts receivables | 42,000 | 35,000 |
Allowance for doubtful debts | (4,200) | (3,500) |
Inventory | 11,500 | 8,500 |
Prepaid Insurance | 4,200 | 7,500 |
Equipment | 100,000 | 100,000 |
Accumulated Depreciation - Equipment | (52,000) | (45,000) |
Deferred Tax Asset | ? | 2,400 |
Liabilities | ||
Accounts Payable | 29,000 | 26,000 |
Provision for long service leave | 7,500 | 7,000 |
Interest Payable | 7,000 | 4,500 |
Deferred Tax Liability | ? | 3,200 |
Additional information
· Accumulated depreciation of equipment for tax purposes was $78,000 as at 30 June 2020, and depreciation for tax purposes for the year ended 30 June 2020 amounted to $10,500.
· The tax rate is 30%.
Required
- Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2020. (9 marks)
- Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts as at 30 June 2020.
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry