PART A: Prepare a current tax worksheet (10 MARKS)

You are required to account for income tax for the year ending 30 June 2021.

Relevant information is as follows:

Accounting profit before tax $ 80,000

Non-deductible Fines $ 6,000

Warranty expense $ 7,000

Warranty paid $ 5,000

Depreciation expense $ 10,000

Depreciation allowed for tax $ 12,000

Annual leave expense $ 8,000

Annual leave Paid $ 3,000

R&D (Asset) paid $ 5,000

Corporate tax rate 30%

Required: Prepare the current tax worksheet and the current tax journal entry for 30.6.21.

PART B: Prepare income tax adjustment for the following items (10 MARKS)

1) T Limited accrued $10,000 for warranty expense in the year ended 30 June 2021. This item will not be tax deductible until it is paid. If the company tax rate is 30%. What is the tax effect adjustment on 30 June 2021?

2) B Limited had the following deferred tax balances at reporting date:

deferred tax assets $10,000 deferred tax liabilities $25,000

Effective from the first day of the next financial period, the company rate of income tax was increased from 30% to 25%.

What is the tax effect adjustment entry to recognise the impact of the tax rate change?

3) The following information was extracted from the financial records of ABC Limited: equipment purchased on 1 July 2020 for $100 000 (accounting depreciation 10% straight line; tax depreciation 20% straight line). If the company tax rate is 30%, what is the deferred tax adjustment entry that will be recorded by ABC Limited at 30 June 2021 ?