ACCT 20002 INTERMEDIATE FINANCIAL ACCOUNTING-TUTORIAL IN-CLASS EXERCISES TOPIC: ACCOUNTING FOR INCOME TAX Question Kilcoy Ltd has determined its accounting profit before tax for the year ended 30 June 2017 to be $256 700. Included in this profit are the items of revenue and expense shown below. Royalty revenue (non-taxable exempt $ 8000 income) Proceeds on sale of building Entertainment expense Depreciation expense - buildings Depreciation expense-plant Carrying amount of building sold Doubtful debts expense Annual leave expense 75 000 1 700 7 600 22 500 70 000 4 100 46 000 4 200 15 000 Insurance expense Development expense The company's draft statement of financial position at 30 June 2017 showed the following assets and liabilities: Assets Cash $ 2.500 Accounts receivable $ 21 500 Less: Allowance for doubtful debts (4 100) 17 400 Inventories 31 600 Prepaid insurance Land 4.500 75 000 Buildings 170 000 Less: Accumulated depreciation (59 500) 110 500 Plant 150 000 Less: Accumulated depreciation (67 500) Deferred tax asset (opening balance) 82.500 9 600 333 600 Liabilities Accounts payable Provision for annual leave Deferred tax liability (opening balance) Loan 140 000 $181.000 25 000 10 000 6.000 Additional information (a) Quarterly income tax instalments paid during the year were: 28 October 2016 28 January 2017 (b) 28 April 2017 with the final balance due on 28 July 2017. $18.000 17 500 18 000 The tax depreciation rate for plant (which cost $150 000 3 years ago) is 20%. Depreciation on buildings is not deductible for taxation purposes. (c) The building sold during the year had cost $100 000 when acquired 6 years ago. The company depreciates buildings at 5% p.a., straight-line. Any gain (loss) on sale of buildings is not taxable (i.e. not deductible). (d) (e) During the year, the following cash amounts were paid: Annual leave Insurance $52.000 3 700 Bad debts of $3500 were written off against the allowance for doubtful debts during the year. (f) The $15 000 spent (and expensed) on development during the year is not deductible for tax purposes until 30 June 2018. (g) years. (h) Kilcoy Ltd has tax losses amounting to $12 500 carried forward from prior The company tax rate is 30%. Required 1. Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2017. 2. Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts