Hi, I am confusing with question 1 and 4 in the tutorial, can i get the process and the answer so them? The tutorial is attached below
Part A: Accounting for income tax (4 marks) For journal entries, narration is NOT required. Question (1) 2 marks The accounting profit before tax of Robinhood Ltd for the year ended 31 December 2012 amounted to $15,000 after including the following information. The financial year of the company was from 1 January 2012 to 31 December 2012. Plant: Opening balance based on accounting as at 1 January 2012 was $100,000. Ending balance as at 31 December 2012 was $100,000. Goodwill: Opening balance based on accounting as at 1 January 2012 was $50,000. The recoverable amount at 1 January 2012 and 31 December 2012 was $60,000 and $45,000 respectively. Deferred tax liability in relation to plant as at 1 January 2012 was $3,000. The cumulative taxable temporary difference in relation to plant as at 31 December 2011 and 2012 was $10,000 and $20,000 respectively. Depreciation expense of plant: Depreciation expense based on accounting for the financial year was $20,000. Accumulated depreciation of plant: Opening balance based on accounting as at 1 January 2012 was $20,000. There is no other difference between accounting profit and taxable income except above information. Other tax information: income tax rate was 30 per cent. Required: (i) Complete the tax worksheet to determine the balances of deferred tax asset (DTA) or deferred tax liability (DTL) as at 31 December 2011. (ii) Determine taxable income and current tax liability for the financial year ended 31 December 2012. Prepare the journal entry to record the current tax liability. (iii) Complete the tax worksheet to determine the balances of DTA or DTL as at 31 December 2012 and the change (movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012. (iv)Prepare the journal entry to record the change (the movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012. (0.50 + 0.50 + 0.50+ 0.50 = 2.0 marks) 1 Question (2) 1 mark Rent received in advance: Opening balance as at 1 January 2011 was $3,000; rent received during the financial year amounted to $15,000; and ending balance as at 31 December 2011 was $10,000. Income tax rate was 30 per cent. (i) Prepare the calculation of deferred tax assets or deferred tax liabilities in relation to rent received in advance as at 1 January 2011 and 31 December 2011. (ii) Prepare journal entry to record the change in deferred tax assets or deferred tax liabilities in relation to rent received in advance for the financial year ended 31 December 2011. (iii)How much is assessable rent income based on tax rules for the financial year ended 31 December 2011? (iv)How much is non-assessable rent income based on tax rules for the financial year ended 31 December 2011? (0.25 + 0.25 + 0.25 + 0.25 = 1.00 mark) Question (3) 1 mark Prepaid interest: Opening balance as at 1 January 2011 was $?; interest payment during the financial year amounted to $200; Interest expense recognised for the financial year was $500 and ending balance as at 31 December 2011 was $?. Other information: Taxable temporary difference in relation to prepaid interest for the financial year ended 31 December 2011 was $700. Income tax rate was 30 per cent. (i) Prepare the calculation of deferred tax assets or deferred tax liabilities in relation to prepaid interest as at 1 January 2011 and 31 December 2011. (ii) Prepare journal entry to record the change in deferred tax assets or deferred tax liabilities in relation to prepaid interest for the financial year ended 31 December 2011. (iii)How much is deductible interest based on tax rules for the financial year ended 31 December 2011? (iv)How much is non-deductible interest based on tax rules for the financial year ended 31 December 2011? (0.25 + 0.25 + 0.25 + 0.25 = 1.00 mark) 2 Part B: Consolidation (6 Marks) On 1 July 2008, Paxton Ltd acquired 100% of the share capital of Sutherland Ltd for $ 1,000,000. At that time, the equity of Sutherland Ltd consisted of: Share capital $ 600,000 General reserve 170,000 Retained earnings 80,000 $ 850,000 All the identifiable assets and liabilities of Sutherland Ltd were recorded at fair value except for: Land Plant and equipment Carrying Amount Fair Value $ 550,000 $ 600,000 $ 395,000 $ 435,000 On 1 July 2008, the plant and equipment had a further five-year life and was expected to be used evenly over that time. It originally cost $ 600,000, and had accumulated depreciation of $ 205,000 at 1 July 2008. The land is still on hand at 30 June 2012. The goodwill was impaired by $8,700 on 30 June each year since acquisition. The following intra-group transactions have taken place: (i) On 10 June 2012, Sutherland Ltd paid $60,000 to Paxton Ltd for services rendered. (ii) During the year ended 30 June 2011, Sutherland Ltd sold inventory to Paxton Ltd for $90,000. The inventory originally cost $80,000, and half was sold by 30 June 2011. The inventory has since been sold during the year ending 30 June 2012. (iii)During the year ended 30 June 2012, Sutherland Ltd sold inventory to Paxton Ltd for $108,000. There was a $16,000 mark-up on the cost. All inventory remains on hand at 30 June 2012. (iv)On 1 July 2009, Paxton Ltd sold computers to Sutherland Ltd for $50,000. At the time of transfer, the computers had a carrying amount of $44,000 in the books of Paxton Ltd. The computers have five years of life remaining (For depreciation of non-current assets, Paxton Ltd and Sutherland Ltd use straight line method) (v) On 1 July 2011, Paxton Ltd loaned Sutherland Ltd $2,000,000. During the year ending 30 June 2012, the loan balance was reduced by $150,000, $90,000 interest expense was incurred, and $40,000 of the interest remains unpaid. (vi)On 30 June 2012, Sutherland Ltd sold a motor vehicle to Paxton Ltd for $20,000. At the time of sale, it was recorded in Sutherland Ltd's books at carrying amount of $15,000. The vehicle has 3 years of life remaining (For depreciation of non-current assets, Paxton Ltd and Sutherland Ltd use straight line method) Required: (a) (b) (c) (d) Prepare an acquisition analysis at 1 July 2008. Prepare the revaluation and pre-acquisition journal entries at 1 July 2008. Prepare the revaluation and pre-acquisition journal entries at 30 June 2012. Prepare the consolidation journal entries for intra-group transactions at 30 June 2012. 3 (1 + 1 + 1.6 + 2.4 = 6 marks) 4
