Penguin Ltd began operations on 1 July 2019. One year after operations, the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. However, the statements were prepared for internal purposes, but income tax calculations were ignored. Accounting profit before income tax for the year 30 June 2020 of Penguin Ltd amounted to $2,720,000, including the following revenue and expenses.

Revenue:

Sales 11,760,000

Expenses:

Other expenses 198,000

Rent 74,000

Wages and Salaries 720,000

Cost of sales 6,450,000

Administrative expenses 529,200

Doubtful debts 13,000

Long service leave 252,000

Warranty expenses 151,200

Depreciation Plant & Machinery 201,000

Depreciation Equipment 232,000

Depreciation expense Furnitures and Fixtures 50,000

Insurance Expenses 138,600

Entertainment costs 44,000

Accounting profit for the year $2,720,000

Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2017 $ $

Assets

Cash and cash equivalents 102,000

Inventory 502,800

Receivables (net) 378,000

Prepaid insurance 51,900

Plant cost 2,010,000

Less accumulated depreciation 201,000

1,809,000

Equipment cost 1,160,000

Less accumulated depreciation 232,000

928, 000

Furnitures and fixture cost 600,000

Less accumulated depreciation 50,000

550, 000

Land 2,268,000

Total assets 6,589,700

Liabilities

Payables 403,200

Rent 50,000

Provision for warranty expenses 100,800

Loan payable 1,008,000

Provision for long service leave 56,000

Total liabilities 1,650,200

Net assets 4,939,500

Other information:

The Plants & Machinery are depreciated over 10 over 8 years for taxation purposes. The useful life of computers is 4 years for the tax purposes and 5 years for accounting purposes. Therefore, there is a temporary difference between accounting and taxation depreciation for Plant & Machinery, and Equipment.

All administration, wages and other expenses incurred have been paid as at year- end.

Penguin Ltd has some land which cost $1,470,000 and which has been re-valued to its fair value of $2,268,000.

Entertainment expenses and depreciation of furniture and fixtures are not allowed as deductions for income tax.

The amount of $163,800 long service leave expense has been paid.

Insurance was initially prepaid to the amount of $190,500. Actual amounts paid are

allowed as a tax deduction.

Amounts received from sales, including those on credit terms, are taxed at the time

of the sale is made.

Warranty expenses were accrued and, at the year-end, actual payments were made

of $50,400. Deductions for tax purposes are only available when the amounts are

paid and not as they accrued.

The tax rate is 30 per cent.

Required:

1. (i) Compute the Taxable Income or Loss. (using excel spreadsheet). 12 Marks
2. (ii) Prepare the Taxation Worksheet on the next page in accordance with AASB 112

Income Taxes. (using excel spreadsheet). 10.5 Marks

3. (iii) Prepare the applicable Journal Entries at 30 June 2020 to account for tax using

the Balance Sheet Method.

Question 2 30 Marks Penguin Ltd Assets and Liabilities disclosed in the Statement of Financial Position for the year ended 30 June 2020 Penguin Ltd began operations on 1 July 2019. One year after operations, the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. $ $ However, the statements were prepared for internal purposes but income tax calculations were 102,000 278.00 Ignored. Accounting profit before income tax for the year 30 June 2020 of Penguin Ltd amounted to $2,720,000, including the following revenue and expenses. Assets Cash/ Bank Accounts Receivables Inet) Inventory Prepaid insurance Plants & Machinery-cost Less - Accumulated dea recation Equipment cost Less - Accumulated deprecation 502,200 51,900 2,010,000 201.001) 1,800,000 1,160,000 232.000 928,000 $ 11,760,000 201,000 232,000 50,000 130,600 74,000 198,000 529,200 40,000 720,00 252,000 151.200 6,450,000 Furntures and fixtures cost Less - Accumulated deprecatini Sales Depreciation expense - Plant and Machinery Depreciation expense - Equipment Depreciation expense - Furnitures and Fixtures Insurance Rent of premises Other expenses Administrative experises Entertainment costs Wages Long service leave Warranty expenses Cast of sales 500,000 50,000 Land 550,000 2.263.000 6,589,700 Total assets 403,200 50,000 Liabilities Accounts payables Rent payable Prav sion for warranty expenses Prevsion for long service leave Loan payable Total liabilities Net assets 100,000 88,200 1.000.000 1,650,200 4,939,500 Additional information: The Plants & Machinery are depreciated aver 10 years for accounting purposes, but aver & years for taxation purposes. The useful life af computers is 4 years for the tax aurposes and 5 years for accounting purposes. Therefore, there is a temporary difference between accounting and taxation depreciation for Plant & Machinery, and Equipment 5 Question 2 30 Marks Penguin Ltd Assets and Liabilities disclosed in the Statement of Financial Position for the year ended 30 June 2020 Penguin Ltd began operations on 1 July 2019. One year after operations, the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. $ $ However, the statements were prepared for internal purposes but income tax calculations were 102,000 278.00 Ignored. Accounting profit before income tax for the year 30 June 2020 of Penguin Ltd amounted to $2,720,000, including the following revenue and expenses. Assets Cash/ Bank Accounts Receivables Inet) Inventory Prepaid insurance Plants & Machinery-cost Less - Accumulated dea recation Equipment cost Less - Accumulated deprecation 502,200 51,900 2,010,000 201.001) 1,800,000 1,160,000 232.000 928,000 $ 11,760,000 201,000 232,000 50,000 130,600 74,000 198,000 529,200 40,000 720,00 252,000 151.200 6,450,000 Furntures and fixtures cost Less - Accumulated deprecatini Sales Depreciation expense - Plant and Machinery Depreciation expense - Equipment Depreciation expense - Furnitures and Fixtures Insurance Rent of premises Other expenses Administrative experises Entertainment costs Wages Long service leave Warranty expenses Cast of sales 500,000 50,000 Land 550,000 2.263.000 6,589,700 Total assets 403,200 50,000 Liabilities Accounts payables Rent payable Prav sion for warranty expenses Prevsion for long service leave Loan payable Total liabilities Net assets 100,000 88,200 1.000.000 1,650,200 4,939,500 Additional information: The Plants & Machinery are depreciated aver 10 years for accounting purposes, but aver & years for taxation purposes. The useful life af computers is 4 years for the tax aurposes and 5 years for accounting purposes. Therefore, there is a temporary difference between accounting and taxation depreciation for Plant & Machinery, and Equipment 5