Assignment One Question

Plantation Ltd commenced business on 1 July 2022 with share capital of $562 000. The company purchased some non-current assets on that date. The details of the non-current asset purchases are as follows:

	Machinery	Vehicles
Cost	$400 000	$75 000
Depreciation rate:
Accounting	20%	25%
Tax	15%	50%
Method	Straight line	Straight line

The statement of comprehensive income and statement of financial position for Plantation Ltd at year end were as follows:

Plantation Ltd

Statement of Comprehensive Income

for the year ended 30 June 2023

	$	$
Revenues		500 000
Expenses
Cost of sales	175 000
Depreciation on machinery	80 000
Depreciation on vehicles	18 750
Salaries and wages	125 000
Insurance	10 000
Annual leave	14 000
Rent of premises	20 000
Other expenses	17 250	460 000
Profit before income tax		40 000

Plantation Ltd

Statement of Financial Position

as at 30 June 2023

Assets	$	$
Cash		50 000
Inventory		150 000
Accounts receivable		80 000
Prepaid insurance		20 000
Machinery	400 000
Less: Accumulated depreciation	80 000	320 000
Vehicles	75 000
Less: Accumulated depreciation	18 750	56 250
		676 250
Liabilities
Accounts payable	50 250
Rent payable	10 000
Provision for annual leave	14 000	74 250
Net assets		602 000
Shareholders equity
Share capital		562 000
Retained earnings		40 000
		602 000

Required Calculation Questions

1. Calculate the current tax liability for the year ended 30 June 2023.
2. Complete a worksheet showing the deferred tax balances for the year ended 30 June 2023.
3. Complete the relevant general journal entries to record deferred tax assets and liabilities at 30 June 2023.
4. Prepare an extract from the statement of comprehensive income showing profit before tax, income tax expense and profit after tax for the year ended 30 June 2023. Prepare an extract from the statement of financial position showing any income tax assets and liabilities at 30 June 2023.
5. Tax rate is 30%.

Written Questions

1. Are all differences that exist at the end of the reporting period between the carrying amount and tax bases of assets and liabilities recognised as part of deferred tax assets or deferred tax liabilities? Explain.
2. Despite the fact that deferred tax liabilities and assets are recognised in respect of certain assets and liabilities, the income tax expense (or revenue) of such items is always recognised in the current year. Discuss if this statement is true and provide reasons for your choice.