The following are extracts from the draft financial accounts of Deepwater Bhd for the year ended 31 December 2021.

Additional information:

i) Bad debts of RM20,000 were written off during the year.

ii) The depreciation for tax purposes for the current year and tax base of the office equipment and motor vehicles at 31 December 2021 were as follows: Office Equipment Motor Vehicles

Tax Depreciation (RM) 27,500 16,500

Tax Base (RM) 50,000 30,000

The company's buildings do not qualify for capital allowance.

iii) Entertainment expenses are not allowable as a tax deduction.

iv) The company’s corporate tax rate is 24%.

v) Deepwater Bed accounts for deferred tax using the full provision (Liability method).

Required:

a) Calculate the income tax liability for Deepwater Bhd as of 31 December 2021 and prepare the journal entry to record the income tax payable. (12 marks)

b) Prepare the deferred tax worksheet on 31 December 2021 to determine deferred tax entries for the year. (15 marks)

c) Record the journal entry for Deferred Tax Assets and Deferred Tax Liability for the current financial year. (3 marks)
 
 

Transcribed Image Text:

Income Turnover Cost of sales Gross Profit Expenses Depreciation of building Depreciation of office equipment Depreciation of motor vehicles Entertainment Salaries and wages Audit fees expense Provision for Doubtful Debts Rent of premises Insurance Annual leave expense Bad debts expense Other expenses Total Expenses Profit before income tax RM 1,000,000 (680,000) 320,000 (40,000) (35,000) (20,000) (9,000) (46,000) (16,000) (10,000) (11,000) (12,000) (17,000) (20,000) (19,000) (255,000) 65,000 Income Turnover Cost of sales Gross Profit Expenses Depreciation of building Depreciation of office equipment Depreciation of motor vehicles Entertainment Salaries and wages Audit fees expense Provision for Doubtful Debts Rent of premises Insurance Annual leave expense Bad debts expense Other expenses Total Expenses Profit before income tax RM 1,000,000 (680,000) 320,000 (40,000) (35,000) (20,000) (9,000) (46,000) (16,000) (10,000) (11,000) (12,000) (17,000) (20,000) (19,000) (255,000) 65,000

Answer rating: 100% (QA)

aIncome tax payable 24100 x 65000 Income tax payable RM15600 Journal entry Debit Income tax payable ... View the full answer