Current and deferred tax with tax rate change    LO4, 5, 6 You have been asked by the accountant of Oakey Ltd to prepare the tax‐effect accounting adjustments for the year ended 30 June 2020. Investigations revealed the following information.

(a) In September 2018, the Australian government reduced the company tax rate from 40 cents to 30 cents in the dollar, effective from 1 July 2019.

(b) The profit for the year ended 30 June 2020 was $920 000.

(c) The assets and liabilities at 30 June 2019 and 30 June 2020 were: 2020 2019 Accounts receivable $ 235 000 $ 200 000 Allowance for doubtful debts (13 000) (12 000) Inventories 250 000 220 000 Land 100 000 100 000 Buildings 800 000 800 000 Accumulated depreciation — buildings (99 000) (70 000) Plant 600 000 600 000 Accumulated depreciation — plant (190 000) (120 000) Development expenditure — at cost 320 000 200 000 Accumulated amortisation — development expenditure (144 000) (80 000) Deferred tax asset ? 29 600 Goodwill (net) — 20 000 Accounts payable 170 000 150 000 Deferred tax liability ? 72 000 Provision for long service leave 36 000 28 000 Provision for warranty claims 32 000 34 000

(d) The company is entitled to claim a tax deduction of 125% for development expenditure in the year of expenditure. The company has adopted the accounting policy of capitalising and then amortising the expenditure over 5 years.

(e) Revenue for the year included: Non‐taxable income $126 000

(f) Expenses brought to account included: Depreciation — buildings $29 000 Depreciation — plant 70 000 Impairment — goodwill (non‐deductible) 20 000 Amortisation — development expenditure 64 000 (g) Accumulated depreciation on plant for tax purposes was $180 000 on 30 June 2019, and $285 000 on 30 June 2020. (h) Bad debts of $14 000 were written off during the year, and warranty repairs to the value of $22 000 were carried out. There was no tax deduction for long service leave in the current year. (i) Buildings are depreciated in the accounting records but no deduction is allowed for tax purposes. Required 1. Prepare the journal entry to account for the change in the income tax rate announced by the Australian government in September 2018. 2. Prepare the worksheets and journal entries to calculate and record the current tax liability, and any movements in deferred tax assets and liabilities for the year ended 30 June 2020.