Lee Limited has the following information for the year ending 31 March 2013:

Current tax payable is $39,950 during the year.

Profit before tax is $150,000 during the year. This amount includes an interest income of $5,000 from Government Bonds. The interest income is never taxable for tax purposes.

As at 31 March 2013, total deferred tax assets were $3,250 and total deferred tax liabilities were $9,500 (i.e., closing balances).

As at 31 March 2012, total deductible temporary differences were $8,000 and total taxable temporary differences were $28,000.

All the changes in deferred tax assets and deferred tax liabilities are related to tax expenses.

The tax rate changed from 30% to 28% at the beginning of the current financial year (1 April 2012).

REQUIRED:

In accordance with NZ IAS 12, calculate Lee Limiteds deferred tax assets and liabilities by completing the attached excel worksheet (WORKSHEET 2), and provide the journal entries to account for its current tax and deferred tax.

(5 marks)

Prepare the income statement extract to show how to disclose the tax expense for the year ending 31 March 2013 for Lee Limited.

(2 marks)

Prepare a numerical reconciliation between Lee Limiteds reported tax expense and its expected tax expense (i.e., the product of accounting profit before tax multiplied by the applicable tax rate).

Lee Limited, worksheet to calculate deferred tax assets and deferred tax liabilities
	DTA	DTL
Closing balances of DTA and DTL
Less: Beginning balances of DTA and DTL (at 30% rate)
Adjust for: Movements during the year related to rate change
Adjust for: Movements during the year related to equity account if any
Remaining Adjustments to be made in journal entry