Accounting for income tax

Tulip Ltd commenced business on 1 July 2018, with share capital of $700,000. The following information is available for the year ended 30 June 2019:

Calculation of profit for the year ended 30 June 2019
	$	$
Income: Revenue		1 430 000
Royalty (exempt from income tax)		10 000
Expenses:
Cost of sales	725 000
Advertising expense	204 000
Annual leave expense	24 000
Depreciation equipment	35 000
Depreciation motor vehicles	20 000
Doubtful debts expense	14 000
Entertainment (not tax deductible)	2 000
Insurance expense	14 000
Interest expense	17 000
Motor vehicle expenses	3 000
Rent expense	87 000
Repairs and maintenance	6 000
Salaries and wages	298 000
Telephone	5 000
Warranty expenses	18 000
Other expenses	42 000	1 514 000
Accounting profit/(loss) before tax		(74 000)

Assets and liabilities as at 30 June 2019
	$	$
Assets
Cash		12 000
Inventory		146 000
Accounts receivable	193 000
Less: allowance for doubtful debts	(12 000)	181 000
Prepaid insurance		3 000
Equipment cost	400 000
Less: accumulated depreciation	(35 000)	365 000
Motor vehicles cost	150 000
Less: accumulated depreciation	(20 000)	130 000
Total assets		837 000
Liabilities
Accounts payable		4 000
Bank loan		170 000
Provision for annual leave		22 000
Provision for warranties		15 000
Total liabilities		211 000

Additional information:

• The directors have advised that they did spend a significant amount of money on advertising and salaries and wages during 2019, as Tulip Ltd sought to market the business and its products to consumers. The directors expect to see significant profits in the next financial year given the success of their advertising campaigns.
• The company purchased equipment at a cost of $400,000 on 1 July 2018. The equipment is depreciated over eight years for accounting purposes, and five years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $120,000).
• The company purchased motor vehicles at a cost of $150,000 on 1 July 2018. The motor vehicles are depreciated over six years for accounting purposes, and eight years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $30,000).
• Tax deductions for annual leave, warranties, insurance are available when the amounts are paid, and not as amounts are accrued.
• Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.
• Tax deductions are not available for doubtful debts. Tax deductions are only available when bad debts are written off.
• The tax rate is 30%.

Required:

i) Determine the balance of any current tax liability and deferred tax assets and deferred tax liabilities for Tulip Ltd as at 30 June 2019, in accordance with AASB 112. Use appropriate worksheets and show all necessary workings.

ii) Prepare the journal entries to record the current tax liability and deferred tax assets and deferred tax liabilities.