The draft statement of financial position at 30 June 2021 for Red Ltd contained the following assets and liabilities:

 

	2021	2020
	$	$
Assets
Cash	1,000	7,500
Accounts receivable	84,000	76,800
Allowance for doubtful debts	(5,000)	(3,200)
Inventory	65,100	58,300
Interest receivable	2,000	-
Prepaid rent	3,800	2,400
Plant – cost	220,000	220,000
Less: accumulated depreciation	(99,000)	(66,000)
Goodwill	6,000	6,000
Deferred tax asset	?	30,860
Total assets		332,660
Liabilities
Accounts payable	70,200	73,600
Provision for employee benefits	62,000	61,000
Loan payable	100,000	100,000
Deferred tax liability	?	2,220
Total liabilities		236,820

 

Additional information:

1. The plant’s tax depreciation rate is 10% and accounting rate is 15% per year. Both rates use the straight-line method. The plant was acquired 3 years ago and there have been no purchases or sale of plant since.
    
2. The deferred tax asset (DTA) balance at 30 June 2020 comprised:
   DTAs relating to temporary differences: $25,860
   DTAs relating to carried forward tax losses: $5,000
   During the year ended 30 June 2021, a taxable income was calculated and the carried forward tax losses were claimed in full. The journal entry for this adjustment was already recorded.
    
3. The tax rate is 30%.

 

 

Required: 

1. Calculate the deferred tax assets and deferred tax liabilities for the year ended 30 June 2021 using a worksheet with the following headings: 

Account

Carrying Amount

Future Deductible Amount

Tax Base

Taxable Temporary Differences

Deductible Temporary Differences

 

Show all accounts.

2. Prepare the necessary journal entries to record the deferred tax asset and deferred tax liability adjustment as at 30 June 2021.                                               

3. With reference to the relevant accounting standard, explain whether all temporary differences that exist at balance date will give rise to deferred tax assets or deferred tax liabilities?

Answer rating: 100% (QA)

Account Carrying Future Deductible Tax Base Taxable Temporary Deductible Temporary Amount Amount Differences Differences Deferred Tax Assets 25860 258... View the full answer