Net profit before tax is $80,000. A number of items included in the determination of profit have to be treated differently for taxation purposes

Accounting Treatment

Taxation Treatment

$

$

Capital profit on asset sale

15,000

Nil

Transfer to Warranty expense provision

17,000

Nil

Depreciation expense - Plant and Equipment

14,000

16,500

Transfer to Doubtful Debts allowance

13,000

Nil

An extract from the balance sheet at balance day reveals:

Carrying

Tax

Amount

Base

Assets

$

$

Plant and Equipment - at cost

100,000

100,000

Accumulated Depreciation

- 60,000

-62,500

40,000

37,500

Accounts Receivable (net)

73,000

81,000

Liabilities

Provision for Warranty expense

10,000

Nil

Rent received in Advance

7,000

Nil