. Calculation of deferred tax and journal entry to adjust deferred tax

The following information was extracted from the records of SydMel Ltd for the year ended 30 June 2021.

SydMel Ltd Statement of Financial Position (Extract) As at 30 June 2021
Assets
Accounts receivables	$26,000
Allowance for doubtful debts	2,500	$23,500
Equipment	150,000
Accumulated depreciation – Equipment (20% per year)	30,000	120,000
Liabilities
Interest Payable	2,000	2,000
Provision for employee benefits	5,000	5,000

Additional information

• The allowed deductible tax depreciation rate for Equipment is 25%.
• None of the employee benefits has been paid. It is not deductible for tax purposes until it is actually paid.
• The tax rate is 30%.

Required

1. Prepare a deferred tax worksheet to identify the temporary differences arising in respect of the assets and liabilities in the statement of financial position, and to calculate the balance of the deferred tax liability and deferred tax asset accounts at 30 June 2021. Assume the opening balances of the deferred tax accounts were $2,200 for Deferred Tax Assets and $1,500 for Deferred Tax Liability.
2. Prepare the journal entry to adjust the deferred tax account.

Answer Response Template:

SydMel Ltd

Deferred tax worksheet at 30 June 2021

Carrying Amount (CA)	Future Taxable Amount (FTA)	Future Deductible Amount (FDA)	Tax Base (TB)	Taxable Temporary Differences (TTD)	Deductible Temporary Differences (DTD)
These differences result in DTL (Deferred Tax Liability	These differences result in DTA (Deferred Tax Assets)
$	$	$	$	$	$
Relevant Assets
Relevant Liabilities
Total Temporary Differences
Excluded differences	-	-
Temporary Differences
DTL
DTA
Beginning balances
Movements during year	-	-
Adjustment

2. In tax-effect accounting, the temporary differences between the carrying amount and the tax base for assets and liabilities leads to the establishment of deferred tax assets and liabilities in the accounting records. List examples of temporary differences that create:

1. a. deferred tax assets
2. b. deferred tax liabilities.

Answer rating: 100% (QA)

Answer Step 1 CONCEPT A Deferred Tax in form of asset or liability need to be recognized when there ... View the full answer