Question
At 30 th June 2018, LMS Ltd had the following balances. Asset or Liability Carrying Amount($000) Computer at Cost 300 Accumulated Depreciation (60) Computers net
At 30th June 2018, LMS Ltd had the following balances.
Asset or Liability
Carrying Amount($000)
Computer at Cost
300
Accumulated Depreciation
(60)
Computers net
240
Accounts Receivable
100
Allowance for doubtful debts
(10)
Accounts Receivable (net)
90
Provision for Warranty Costs
30
Provision for Long Service Leave
20
Statement of profit or loss and other comprehensive income for LMS Ltd for the year ending 30 June 2019$000
Revenue
4000
COGS
(1800)
Depreciation Expenses
(60)
Warranty Expenses
(90)
Bad and doubtful debts
(25)
Other Expenses
(1375)
Profit before Tax
650
Other Comprehensive Income
Nil
LMSLtd depreciates computers over five years in its accounting records but over three years for tax purposes. The straight-line method is used. During the year, LMS wrote off bad debts amounting to $15 000. Warranty costs of $70 000 were paid during the year. No amounts were paid for long-service leave during the year. The following information is extractedfrom the statement of financial position at 30 June 2019:
Assets
Accounts Receivable
120
Allowance for Doubtful Debt
(20)
Liabilities
Provision for warranty Costs
50
Provision for Long Service Leave
30
There was no acquisition of plant and equipment during the year.
The tax rate as at 30 June 2018 and 30 June 2019 was 30 per cent.
Required:
1.Calculate LMS Ltd' taxable income for the year ending 30 June 2019. (2 Marks)
2.Prepare journal entries to record current tax and deferred tax for the year ending 30 June 2019.
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