Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal
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Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal reports for the second year of operations: (Note: data for the first year of operations is available from Week 3 Lecture Example)Income Statement (Extract) for the year ended 30 June 2020
$ | $ | |
Gross profit .............................................................................................. | 756 000 | |
Expenses | ||
Administration expenses ....................................................................... | 57 000 | |
Doubtful debts expense ……………………………………………………. 20 000 | ||
Salaries expense………......................................................................... | 195 000 | |
Interest .................................................................................................. | 13 000 | |
Long-service leave ................................................................................ | 28 000 | |
Warranty expense ................................................................................. | 41 000 | |
Depreciation expense – plant ............................................................... | 80 000 | |
Insurance expense ............................................................................... | 30 000 | 464 000 |
Accounting profit before income tax expense | 292 000 |
Assets and liabilities as disclosed in the balance sheet as at 30 June 2020 were:
Assets | |
Cash ..................................................................................................... | 26 000 |
Inventory ............................................................................................... | 105 000 |
Accounts Receivable (net of $5,000 D. Debt Allowance) ..................... | 130 000 |
Prepaid insurance ................................................................................. | 3 000 |
Plant – cost ........................................................................................... | 400 000 |
Accum Depn – Plant ............................................................................. | 160 000 240 000 |
Liabilities | |
Accounts Payable .................................................................................. | 74 500 |
Provision for warranty ............................................................................ | 45 000 |
Provision for long-service leave ............................................................. | 2 000 |
Loan Payable ......................................................................................... | 175 000 |
Additional information:
- Plant is depreciated straight-line with no residual value over five years for accounting purposes and four years for taxation purposes.
- The administration expense includes payment of $12,000 for goodwill impairment.
- Bad debts written off during the year were $21,000.
- Insurance, warranty and long-service leave are deductible for tax purposes when paid.
- The tax rate is 30%
Required:
(a) Calculate taxable income and its current tax consequences.
(b) Complete the deferred tax worksheet (use the template attached here:
(ACCT3007 Week 3 Homework Part (b) Template.docx)
(c) Prepare the journal entries for both the current and deferred tax consequences and for disclosure of deferred tax in the Balance Sheet.
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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