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Expenses Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal reports for the second year of
Expenses Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal reports for the second year of operations: (Note: data for the first year of operations is available from Week 3 Lecture Example) Income Statement (Extract) for the year ended 30 June 2020 Gross profit Administration expenses..... $ 800 000 62 000 Doubtful debts expense................... 18 000 Salaries expense Interest 205 000 12 000 Long-service leave 30 000 Warranty expense 35 000 Depreciation expense-plant. 80 000 Insurance expense 25 000 467 000 Accounting profit before income tax expense 333 000 Assets and liabilities as disclosed in the balance sheet as at 30 June 2020 were: Assets Cash Inventory...... Accounts Receivable (net of $5,000 D. Debt Allowance) Prepaid insurance Plant-cost Accum Depn Plant. Liabilities 20 000 105 000 115 000 2 000 400 000 160 000 240 000 Accounts Payable. Provision for warranty Provision for long-service leave. Loan Payable............ Additional information: 80 000 50 000 3 000 185 000 Plant is depreciated straight-line with no residual value over five years for accounting purposes and four years for taxation purposes. The administration expense includes payment of $12,000 for goodwill impairment. Bad debts written off during the year were $19,000. Insurance, warranty and long-service leave are deductible for tax purposes when paid. Required: The tax rate is 30% (a) Calculate taxable income and its current tax consequences. Student Name:.. Student ID:. (b) Complete the deferred tax worksheet (use the following template). 2. Determine future tax consequences for year end 30 June 2020 30 June 2020 Assets Liabilities Carrying Amount Tax Base Deductible Taxable Temporary Temporary Differences Differences Expense Payable Income Tax Income Tax $ $ $ $ $ $ Temporary differences at period end Less: Prior period amounts Movement for the period Tax affected Tax on taxable income Income tax adjustments required (c) Prepare the journal entries for both the current and deferred tax consequences and for disclosure of deferred tax in the Balance Sheet. (narrations are required) 4
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