Geelong Ltd commences operations on 1 July 2019 and presents its first statement of comprehensive income and first statement of financial position on 30 June 2020 The following information is available Statement of Comprehensive Income for the year ended 30 June 2020 Extract Sales 780,000 Less Cost of Goods Sold 495,000 Gross Profit 285,000 Expenses Administration expenses 50,000 Salaries 27,500 Long service leave 5,000 Warranty expenses 10,000 Depreciation plant 37,500 Insurance 7,000 137,000 Profit before tax 148,000 Assets and Liabilities as disclosed in the Statement of Financial Position as at 30 June 2020 Extract ASSETS Cash 20,000 Accounts receivable 45,000 Inventory 40,000 Prepaid insurance 3,000 Plant cost 150,000 Less Accumulated depreciation 37,500 112,500 Total Assets 220,500 LIABILITIES Accounts payable 35,000 Provision for warranty expenses 7,500 Loan payable 77,000 Provision for long service leave 5,000 Total liabilities 124,500 Net Assets 96,000 Question 2 (cont) Additional Information Warranty expenses were accrued and at year end, actual payments of $2,500 were made (leaving an accrued balance of $7,500) Deductions for tax purposes are only available when the amounts are paid, and not as they are accrued Insurance was initially prepaid to the amount of $10,000 At year end, the unused component of the prepaid insurance amounted to $3,000 Actual amounts paid are allowed as a tax deduction Amounts received from sales, including those on credit terms, are taxed at the time the sale is made The plant is depreciated over four (4) years for accounting purposes, but over three (3) years for taxation purposes All administration and salaries expenses incurred have been paid at year end None of the long service leave expense has actually been paid It is not deductible until it is actually paid The tax rate is 30 percent Required Prepare a tax reconciliation (that is, determine Geelong Ltds taxable income) 5 Marks Complete the Taxation Worksheet provided on page 5 in accordance with AASB 112 Income Taxes Copy the table provided in page 5 and paste it in your answer document to complete the Taxation Worksheet 12 Marks Prepare the applicable journal entries to record the tax adjustments as at 30 June 2020 3 Marks

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Geelong Ltd commences operations on 1 July 2019 and presents its first statement of comprehensive income and first statement of financial position on 30 June

Geelong Ltd commences operations on 1 July 2019 and presents its first statement of comprehensive income and first statement of financial position on 30 June 2020. The following information is available:

Statement of Comprehensive Income for the year ended 30 June 2020 [Extract]

Sales 780,000

Less Cost of Goods Sold 495,000

Gross Profit 285,000

Expenses:

Administration expenses 50,000

Salaries 27,500

Long-service leave 5,000

Warranty expenses 10,000

Depreciation plant 37,500

Insurance 7,000 137,000

Profit before tax 148,000

Assets and Liabilities as disclosed in the Statement of Financial Position as at 30 June 2020 [Extract]

ASSETS

Cash 20,000

Accounts receivable 45,000

Inventory 40,000

Prepaid insurance 3,000

Plant - cost 150,000

Less Accumulated depreciation 37,500 112,500

Total Assets 220,500

LIABILITIES

Accounts payable 35,000

Provision for warranty expenses 7,500

Loan payable 77,000

Provision for long service leave 5,000

Total liabilities 124,500

Net Assets 96,000

Question 2 (cont)

Additional Information

Warranty expenses were accrued and at year end, actual payments of $2,500 were made (leaving an accrued balance of $7,500). Deductions for tax purposes are only available when the amounts are paid, and not as they are accrued.

Insurance was initially prepaid to the amount of $10,000. At year end, the unused component of the prepaid insurance amounted to $3,000. Actual amounts paid are allowed as a tax deduction.

Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.

The plant is depreciated over four (4) years for accounting purposes, but over three (3) years for taxation purposes.

All administration and salaries expenses incurred have been paid at year end.

None of the long service leave expense has actually been paid. It is not deductible until it is actually paid.

The tax rate is 30 percent.

Required:

Prepare a tax reconciliation (that is, determine Geelong Ltds taxable income).

5 Marks

Complete the Taxation Worksheet provided on page 5 in accordance with AASB 112: Income Taxes. [Copy the table provided in page 5 and paste it in your answer document to complete the Taxation Worksheet].

12 Marks