Accounting for income tax Blaze Ltd commenced business on 1 July 2015, with share capital of $300,000. On 30 June 2016, thecompany presents its first Statement of Profit or Loss and Other Comprehensive Income, and firstStatement of Financial Position. The statements are prepared before considering taxation. Thefollowing information is available: Extract from statement of profit or loss and other comprehensive income for the year ended 30 June2016 $ $Revenue 750,000Government grant (exempt from income tax) 30,000 Expenses: Cost of sales 325,000Annual leave 13,000Depreciation - equipment 40,000Depreciation - motor vehicles 15,000Doubtful debts expense 6,000Entertainment expenses (not tax deductible) 4,500Insurance 10,000Rent 26,000Salaries 125,000Warranty expenses 7,500Other expenses 17,250 (589,250)Accounting profit before tax 190,750 Assets and liabilities as disclosed in the Statement of Financial Position as at 30 June 2016 $Assets: Cash 20,000Inventory 85,900Accounts receivable 80,000 Allowance for doubtful debtsLess (4,000) 76,000Prepaid insurance 3,000Equipment - cost 400,000 Accumulated depreciationLess (40,000) 360,000Motor vehicles - cost 60,000 Accumulated depreciationLess (15,000) 45,000 Total assets 589,900 Liabilities: Accounts payable 50,250Loan 25,000Provision for annual leave 11,000Provision for warranties 6,900Rent payable 6,000Total liabilities 99,150Net assets 490,750 Equity Share capital 300,000Retained earnings 190,750 490,750 $Charles Sturt University Subject OutlineACC514 201660 SM I-21 June 2016-Version 1 Page of 17 33Additional information:Required:The company purchased equipment at a cost of $400,000 on 1 July 2015. The equipment isdepreciated over ten years for accounting purposes (residual value of nil), using thestraight-line basis of depreciation. The tax depreciation rate for this equipment is 15% perannum.The company purchased motor vehicles at a cost of $60,000 on 1 July 2015. The motorvehicles are depreciated over four years for accounting purposes (residual value of nil), usingthe straight-line basis of depreciation. The tax depreciation rate for these motor vehicles is20% per annum.Tax deductions for annual leave, warranty and rent are available only when the amounts arepaid, and not as they are accrued.Actual amounts paid for insurance are allowed as a tax deduction.Amounts received from sales, including those on credit terms, are taxed at the time the saleis made.The tax rate is 30%.a) Determine the balance of any current and deferred tax assets and liabilities for Blaze Ltd as at 30June 2016, in accordance with AASB 112. Show all necessary workings.b) Prepare the journal entries to record the current tax liability and movements in deferred tax assetsand liabilities.

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