Lowsales Ltd has the following extract from the statement of financial position as at 30 June 2021 $ Cash at bank 97,000 Accounts Receivable (net) 234,000 Prepaid Rent 4,000 Inventory 228,000 Equipment (net) 48,000 Total Assets 611,000 Accounts Payable 67,000 Revenue Receved in Advance 18,000 Bank Loan 100,000 Foreign Currency Loan Payable 32,000 Employee Benefits Liability 65,000 Total Liabilities 282,000 The following information is relevant for Lowsales Ltd Revenue received in advance is recognised in the statement of financial position of Lowsales Ltd and will be recognised in their statement of comprehensive income when the revenue is earned The employee benefits liability increases with additional employee expenses and decreases when the liability is paid For tax purposes, deductions can only be claimed for bad debts written off As at 30 June 2021, the allowance for doubtful debts was $11,000 and the allowance had increased by $5,000 The revenue relating to the accounts receivable has already been taxed The equipment was originally purchased four years ago for $80,000 The equipment is being deducted for tax purposes over eight years and for accounting purposes over 10 years The foreign currency loan payable was originally drawn down at $33,000 The $1,000 gain included in the statement of comprehensive income is not included in the taxable profit until the loan is settled Prepaid rent has increased by $2,000 during the year The additional outlay can be claimed as a tax deduction when paid The opening deferred tax asset balance is $16,200 and the opening deferred tax liability balance is $2,400 The taxable profit for the financial year ended 30 June 2021 is $331,000 Assume a tax rate of 30 Required Calculate the relevant temporary differences and deferred taxes in a worksheet and show the movements between the deferred taxes Prepare the journal entries to record the deferred tax assets, deferred tax liability, and the current income tax for the year ended 30 June 2021

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Posted on Jul 10, 2024

Lowsales Ltd has the following extract from the statement of financial position as at 30 June 2021:

Cash at bank 97,000

Accounts Receivable (net) 234,000

Prepaid Rent 4,000

Inventory 228,000

Equipment (net) 48,000

Total Assets 611,000

Accounts Payable 67,000

Revenue Receved in Advance 18,000

Bank Loan 100,000

Foreign Currency Loan Payable 32,000

Employee Benefits Liability 65,000

Total Liabilities 282,000

The following information is relevant for Lowsales Ltd:

Revenue received in advance is recognised in the statement of financial position of Lowsales Ltd and will be recognised in their statement of comprehensive income when the revenue is earned.
The employee benefits liability increases with additional employee expenses and decreases when the liability is paid.
For tax purposes, deductions can only be claimed for bad debts written off. As at 30 June 2021, the allowance for doubtful debts was $11,000 and the allowance had increased by $5,000. The revenue relating to the accounts receivable has already been taxed.
The equipment was originally purchased four years ago for $80,000. The equipment is being deducted for tax purposes over eight years and for accounting purposes over 10 years.
The foreign currency loan payable was originally drawn down at $33,000. The $1,000 gain included in the statement of comprehensive income is not included in the taxable profit until the loan is settled.
Prepaid rent has increased by $2,000 during the year. The additional outlay can be claimed as a tax deduction when paid.
The opening deferred tax asset balance is $16,200 and the opening deferred tax liability balance is $2,400. The taxable profit for the financial year ended 30 June 2021 is $331,000. Assume a tax rate of 30%.

Required:

Calculate the relevant temporary differences and deferred taxes in a worksheet and show the movements between the deferred taxes.
Prepare the journal entries to record the deferred tax assets, deferred tax liability, and the current income tax for the year ended 30 June 2021.