Sunshine Ltd commenced operations in 2019. In the fiscal year ending 30 June 2019 it incurred a loss of $100,000. It is expected that the company will not incur losses again and will generate taxable profit in subsequent years. The profits before tax in the following years are as follows:

Year		Profit before tax
		$
2020		30,000
2021		50,000
2022		60,000

It is assumed that there are no temporary differences between the carrying values of Sunshine Ltd’s assets and liabilities and the respective tax bases from 2019 to 2022.

The tax rate is 30 per cent.

Required:

a) Provide the journal entries (with narrations) to show the recognition of the asset associated with the tax loss, as well as the journal entries (with narrations) to recognise the use of the loss.

b) Suppose Sunshine Ltd has a depreciable non-current asset that cost $300,000 and has a carrying amount of $200,000 on 30 June 2025. For tax purposes, accumulated depreciation amounts to $180,000.

Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability?

Answer rating: 100% (QA)

a Loss in the year 2019 100000 Tax rate 30 Deferred tax asset on Loss Loss incurred Tax rate 100000 ... View the full answer