Answered step by step
Verified Expert Solution
Question
1 Approved Answer
#26. Boiling Pot Ltd commences operations on 1 July 2022. One year after the commencement of its operations (30 June 2023) the entity prepares the
#26. Boiling Pot Ltd commences operations on 1 July 2022. One year after the commencement of its operations (30 June 2023) the entity prepares the following information, showing both the carrying amounts for accounting purposes and the tax bases of the respective assets and liabilities. Carrying amounts Tax bases 60 000 60 000 Assets Cash Accounts receivable-net Prepaid insurance Inventory Plant-net 60 000 50 000 20 000 80 000 450 000 600 000 1 260 000 80 000 400 000 400 000 1 000 000 Land 60 000 Liabilities Accounts payable Provision for long-service leave Provision for warranty Loan payable 60 000 30 000 40 000 400 000 530 000 730 000 400 000 460 000 540 000 Net assets Other information After adjusting for differences between tax rules and accounting rules, it is determined that the taxable profit of Boiling Pot Ltd is $700 000 There is an allowance for doubtful debts of $10 000. An item of plant is purchased at a cost of $600 000 on 1 July 2022. For accounting purposes it is expected to have a life of four years; however, for taxation purposes it can be depreciated over three years. It is not expected to have any residual value. Boiling Pot Ltd has some land, which cost $400 000 and which has been revalued to its fair value of $600 000 in accordance with AASB 116. None of the amounts accrued in respect of warranty expenses or long-service leave has actually been paid. The tax rate is 30 per cent. REQUIRED Prepare the year-end journal entries to account for tax using the balance sheet method. LO 18.1, 18.2, 18.3, 18.4, 18.6
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started