Calculation of current and deferred tax, and prior year amendment The accounting profit before tax of Nebo Ltd for the year ended 30 June 2020 was $22 240. It included the following revenue and expense items. Government grant (non-taxable) Entertainment expense (non-deductible) Doubtful debts expense Depreciation expense - plant Insurance expense Annual leave expense $ 3 600 11 100 8 100 24000 12 900 15 400 The accounting profit before tax for Nebo Ltd for the year ended 30 June 2020 also included a gain on sale of plant of $3000. The draft statement of financial position as at 30 June 2020 included the following assets and liabilities. 7 L L 2020 Accounts receivable Allowance for doubtful debts Prepaid insurance Plant Accumulated depreciation - plant Deferred tax asset Provision for annual leave Deferred tax liability $ 156 000 (6 800) 3400 240 000 (134 400) 2 2019 $ 147 500 (5200) 5600 290 000 (130 400) 9990 9700 9504 14 100 . Additional information In November 2019, the company received an amended assessment for the year ended 30 June 2019 from the tax authority. The amendment notice indicated that an amount of $4500 claimed as a deduction had been disallowed. Nebo Ltd has not yet adjusted its accounts to reflect the amendment. For tax purposes, the carrying amount of plant sold was $26 000. This sale was the only movement in plant for the year. The tax deduction for plant depreciation was $28 800. Accumulated depreciation at 30 June 2019 for taxation purposes was $156 480. In the previous year, Nebo Ltd had made a tax loss of $18 400. Nebo Ltd recognised a deferred tax asset in respect of this loss. The tax rate is 30%. . Required 1. Prepare the journal entry necessary to record the amendment to the prior year's taxation return. 2. Prepare the current tax worksheet and journal entry/entries to calculate and record the current tax for the year ended 30 June 2020. 3. Justify your treatment of annual leave expense in the current tax worksheet. 4. Calculate the temporary difference as at 30 June 2020 for each of the following assets. Explain how these differences arise and why you have classified them as either deductible temporary differences or taxable temporary differences: (a) plant (b) accounts receivable. (LO3, LO4 and LO5) Calculation of current and deferred tax, and prior year amendment The accounting profit before tax of Nebo Ltd for the year ended 30 June 2020 was $22 240. It included the following revenue and expense items. Government grant (non-taxable) Entertainment expense (non-deductible) Doubtful debts expense Depreciation expense - plant Insurance expense Annual leave expense $ 3 600 11 100 8 100 24000 12 900 15 400 The accounting profit before tax for Nebo Ltd for the year ended 30 June 2020 also included a gain on sale of plant of $3000. The draft statement of financial position as at 30 June 2020 included the following assets and liabilities. 7 L L 2020 Accounts receivable Allowance for doubtful debts Prepaid insurance Plant Accumulated depreciation - plant Deferred tax asset Provision for annual leave Deferred tax liability $ 156 000 (6 800) 3400 240 000 (134 400) 2 2019 $ 147 500 (5200) 5600 290 000 (130 400) 9990 9700 9504 14 100 . Additional information In November 2019, the company received an amended assessment for the year ended 30 June 2019 from the tax authority. The amendment notice indicated that an amount of $4500 claimed as a deduction had been disallowed. Nebo Ltd has not yet adjusted its accounts to reflect the amendment. For tax purposes, the carrying amount of plant sold was $26 000. This sale was the only movement in plant for the year. The tax deduction for plant depreciation was $28 800. Accumulated depreciation at 30 June 2019 for taxation purposes was $156 480. In the previous year, Nebo Ltd had made a tax loss of $18 400. Nebo Ltd recognised a deferred tax asset in respect of this loss. The tax rate is 30%. . Required 1. Prepare the journal entry necessary to record the amendment to the prior year's taxation return. 2. Prepare the current tax worksheet and journal entry/entries to calculate and record the current tax for the year ended 30 June 2020. 3. Justify your treatment of annual leave expense in the current tax worksheet. 4. Calculate the temporary difference as at 30 June 2020 for each of the following assets. Explain how these differences arise and why you have classified them as either deductible temporary differences or taxable temporary differences: (a) plant (b) accounts receivable. (LO3, LO4 and LO5)