The accounting profit before tax of Subang Ltd for the year ended 30 June 2020 was $320,000.
Question:
The accounting profit before tax of Subang Ltd for the year ended 30 June 2020 was $320,000. It included the following revenue and expense items:
Legal expenses
62 500
Interest expense
10 000
Bad debt expense
15 000
Depreciation expense – Plant & equipment
26 250
Entertainment Expense
2 500
Audit fee
40 000
Interest revenue
15 000
Rent revenue
10 000
Exempt income
37 500
Additional information:
1). Interest receivable at 30 June 2020 is $12,500 (2019: $15,000). Interest payable at 30 June 2020 is $500 (2019: $3,000). Interest is assessable on receipt and deductible when paid.
2). The company raised an accrual liability of $17 500 for audit work performed and not paid by 30 June 2020 (2019: $15,000). Fees for audit work are not deductible unless the audit work has been performed and paid.
3). Rent revenue relates to a contract where the annual rent is received in advance. The unearned revenue liability at 30 June 2020 is $10,000 (2019: $7,500). Rent is assessable when received.
4). Legal expenses include $25,000 related to capital transactions that are not deductible.
5). The bad debts expense relates to an account that has been written off.
6). Plant and equipment is as follows:
30 June 2020 30 June 2019
Plant & Equipment $175 000 48 750
Accumulated depreciation $75 000 22 500
126 250 52 500
7. Tax depreciation for 30 June 2020 is $35,000. The tax written down value of plant and equipment at 30 June 2020 is $110,000 (2019: $45,000).
8. The deferred tax balances at 30 June 2019 are; deferred tax liability $6,750 and deferred tax asset $12,300.
9. The company tax rate is 30%.
Required:
a) Prepare the current tax worksheet and the journal entry to recognize the current tax as at 30 June 2020.
b) Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts for 30 June 2020.
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett