Kingfisher Ltd reported an Accounting Profit before Income Tax Expense of $1,250,000 for the year ended 30
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Question:
Kingfisher Ltd reported an Accounting Profit before Income Tax Expense of $1,250,000 for the year ended 30 June 2019.
Additional Information:
- On 1 July 2017 Kingfisher Ltd purchased a machine for $2,000,000. For accounting purposes, the machine is depreciated on a straight-line basis over its useful life of 10 years. For tax purposes, the machine is eligible to be depreciated on a 20% reducing balance basis.
- On 1 July 2018, the balance of the Long Service Leave Liability was $800,000. During the financial year ended 30 June 2019, Kingfisher Ltd provided $150,000 for Long Service Leave, and paid Long Service Leave benefits of $30,000. For tax purposes, long service leave is deductible when the long service leave is paid.
- During the year ending 30 June 2019, Kingfisher Ltd incurred development expenditure of $50,000. For accounting purposes, the development expenditure was capitalised as an asset, and will be amortised on a straight-line basis over the next 5 years. For tax purposes, the development expenditure is deductible in the year it is incurred.
- During the year ending 30 June 2019, Kingfisher Ltd incurred entertainment expenses of $10,000. For tax purposes, entertainment expenses are not tax deductible.
- The tax rate is 30%.
REQUIRED:
- Calculate taxable income for year ended 30 June 2019. Show all workings necessary to derive your answer.
- Determine taxable and deductible temporary differences and associated deferred tax liabilities and deferred tax assets at 30 June 2018 and at 30 June 2019.
- Prepare the journal entry for Kingfisher Ltd, to account for income tax for the year ending 30 June 2019, in accordance with AASB112: Income Taxes. Show all workings necessary to derive your answer.
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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