Question
Linh Do Accounting Firm Ltd commences its business operations on 1 July 2020. On the same date, the company purchases a heavy-working machine at a
Linh Do Accounting Firm Ltd commences its business operations on 1 July 2020.
On the same date, the company purchases a heavy-working machine at a cost of $1,000,000.
The machine is being depreciated using Straight-line method and expected to have a useful life of five years. It has no residual value at the end of year 5.
For taxation purposes, the ATO allows the company to depreciate the asset over four yearsthat is, $250 000 per year.
The accounting profit before tax of the company for each of the next five years (for years ending 30 June) is shown as following:
Year 2021: $850,000
Year 2022: $ 900,000
Year 2023: $1,000,000
Year 2024: $1,200,000
Year 2025: $1,500
The company tax rate is 30 per cent
Required: Prepare calculation for Deferred Tax Liability & necessary Journal Entries for year to record for DTL & Income Tax Expense
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