Pakenham Ltd commences its operations on 1 July 2019. One year after the commencement of its operations (30 June 2020) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. The statements are prepared before considering taxation. The following information is available.

0ther information:
▪ All selling, administration, and salaries and wages expenses incurred have been paid as at year-end.
▪ Pakenham Ltd has some land which cost $4,000,000 and which has been revalued to its fair value of $6,300,000.
▪ Insurance was initially prepaid to the amount of $560,000. At the year-end, the unused component of the prepaid insurance amounted to $200,000. Actual amounts paid are allowed as a tax deduction.
▪ Amounts received from sales, including those on credit terms, are taxed at the time of the sale is made.
▪ The amount of $400,000 long service leave expense has been paid.
▪ The equipment is depreciated over 5 years for accounting purposes, but over 4 years for taxation purposes.
▪ Warranty expenses were accrued $400,000 and, at the year-end actual payments of $280,000 had been made (leaving of accrued balance of $120,000). Deductions for tax purposes are only available when the amounts are paid and not as they accrued.
▪ Entertainment and fines and penalties are not allowed as a deduction in calculating taxable income.
▪ The tax rate is 30 per cent.
Required:
(i) Compute the taxable income or loss. (using excel spreadsheet)

(ii) Complete the Taxation Worksheet in accordance with AASB 112 Income Taxes. (using excel spreadsheet)(iii) Prepare the applicable journal entries at 30 June 2020 to account for tax using the balance sheet method.
 

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Pakenham Ltd Statement of Comprehensive Income for the year ended 30 June 2020 20,500,000 9.300,000 Sales revenue Cost of Goods Sold Gross Profit 11.200,000 Expenses: Salaries and wages Selling expense Administrative expenses Entertainments 2,000,000 90,000 1,400,000 75,000 25,000 350,000 400,000 Fines and penalties Provision for doubtful debts Warranty expenses Long service leave Depreciation expense – Equipment 700,000 1,120,000 360,000 Insurance 6,520,000 4.680.000 Accounting profit for the year Pakenham Ltd Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2020 24 Assets Cash Inventory Accounts receivables (net) Prepaid insurance Equipment – cost Less- Accumulated depreciation 275,000 1,405,000 1,050,000 200,000 5,600,000 1,120,000 4,480,000 6.300.000 13,710,000 Land Total assets Liabilities Accounts payables Provision for warranty expenses Provision for long service leave Debentures payable 1,120,000 120,000 300,000 2,800,000 4.340.000 9,370,000 Total liabilities Net assets Pakenham Ltd Statement of Comprehensive Income for the year ended 30 June 2020 20,500,000 9.300,000 Sales revenue Cost of Goods Sold Gross Profit 11.200,000 Expenses: Salaries and wages Selling expense Administrative expenses Entertainments 2,000,000 90,000 1,400,000 75,000 25,000 350,000 400,000 Fines and penalties Provision for doubtful debts Warranty expenses Long service leave Depreciation expense – Equipment 700,000 1,120,000 360,000 Insurance 6,520,000 4.680.000 Accounting profit for the year Pakenham Ltd Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2020 24 Assets Cash Inventory Accounts receivables (net) Prepaid insurance Equipment – cost Less- Accumulated depreciation 275,000 1,405,000 1,050,000 200,000 5,600,000 1,120,000 4,480,000 6.300.000 13,710,000 Land Total assets Liabilities Accounts payables Provision for warranty expenses Provision for long service leave Debentures payable 1,120,000 120,000 300,000 2,800,000 4.340.000 9,370,000 Total liabilities Net assets

Answer rating: 100% (QA)

120 Schve Taxable Inome Anpuw 1483000 Accounting Brafit 3600 Lesse Insurahce premium paid as ... View the full answer