Creation and reversal of temporary differences LO5 The following are all independent situations. Prepare the
Question:
Creation and reversal of temporary differences LO5 The following are all independent situations. Prepare the journal entries for deferred tax on the creation or reversal of any temporary differences. Explain in each case the nature of the temporary difference. Assume a tax rate of 30%. 1. The entity has an allowance for doubtful debts of $10 000 at the end of the reporting period relating to accounts receivable of $125 000. The prior period balances for these accounts were $8500 and $97 500 respectively. During the current period, debts worth $9250 were written off as uncollectable. 2. The entity sold a vehicle at the end of the reporting period for $15 000. The vehicle cost $100 000 when purchased 4 years ago, and had a carrying amount of $20 000 when sold. The tax depreciation rate for vehicles of this type is 25% p.a. 3. The entity has recognised an interest receivable asset with an opening balance of $17 000 and an ending balance of $19 500 for the current year. During the year, interest of $127 000 was received in cash. 4. At the end of the reporting period, the entity has recognised a liability of $4000 in respect of outstanding fines for non‐compliance with safety legislation. Such fines are not tax‐deductible.
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Financial Reporting
ISBN: 978-0730363361
2nd Edition
Authors: Janice Loftus ,Ken Leo ,Sorin Daniliuc ,Belinda Luke ,Hong Nee Ang ,Karyn Byrnes