On 1 July 2021 TROJAN Horse Ltd commenced manufacturing clothe lines. For the year ended 30 June 2022, the company recorded an accounting profit before tax of $160,000. On the 30 June 2022, the following financial information is provided:

	carrying amount	tax base
Assets
Motor vehicles	36,000	36,000
Accumulated depreciation motor vehicles	- 18,000	- 9,000
Accounts receivable (net)	35,000	39,000
Plant	40,000	40,000
Accumulated depreciation Plant	-8000	- 10000
Liabilities
Provision for annual leave	3,500	Nil
Provision for LSL	2,000	Nil

Included in the calculation of accounting profit were the following items, which must be treated differently for taxation purposes:

	Accounting Records $	Taxation Records $
Entertainment expenses	9,000	Nil
Transfer to provision for annual leave	8,000	Nil
Transfer to allowance for doubtful debts	5,500	Nil
Depreciation of motor vehicles	18,000	9,000
Depreciation of plant	8,000	10,000
Transfer to LSL	2,000	Nil

Additional information

• 1. during the year, a bad debt of $1,500 was written off and charged against the allowance for doubtful debts. This amount is a taxation deduction
• 2. annual leave amounting to $4,500 was paid during the year and charged against the provision. This amount is a taxation deduction
• 3. no long service leave was paid in the year
• 4. motor vehicles, purchased on 1 July 2021, are depreciated at 50% per year for accounting purposes but at 25% per year for taxation purposes
• 5. plant, purchased on 1 July 2021, is depreciated by 22% for accounting purposes, and 25% for taxation purposes
• 6. all depreciation is calculated using straight line method
• 7. PAYG instalments already remitted to the ATO amount to $51,200
• 8. income tax rate is 25%.

To complete the assessment you are required to:

1. a. prepare a statement of taxable income for the year ended 30 June 2022, and identify differences as PERMANENT or TEMPORARY-Deferred Tax Asset or Deferred Tax Liability, where appropriate.
2. b. prepare the general journal entries for income tax expense and deferred tax in accordance with AASB112.

Answer rating: 100% (QA)

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