Eve Ltd has an equipment that was initially acquired at a cost of $160 000 on 1 July 2019. The equipment has zero residual value. The depreciation rates for accounting and tax purposes are 5 years and 4 years respectively. The company tax rate is 30%.

Required

Type your answers in the spaces provided showing all workings.

As at the year end 30 June 2021 (2 years later),

(a) what is the carrying amount and tax base of the asset?

(b) what is the amount of the temporary difference?

(c) will that lead to deferred tax asset or deferred tax liability?

(d) Prepare the appropriate journal entry to account for the future tax consequences.

(e) Provide the reason for recording a deferred tax liability or a deferred tax asset in part (c) and (d).