Q7 Tax Accounting 17 Points You are provided with the following information from the accounts of FRED Ltd for the year ending 30 June 2019. The accounting profit before income tax is $37,000. Numbers are in Australian Dollars. Entertainment expense 4,000 Depreciation expense Plant 40,000 Rent expense 10,000 Doubtful debts expense 4,000 Provision for employees' annual leave 3,000 Goodwill impairment expense 7,000 Extract from Balance Sheet 30 June 2019 Assets Prepaid insurance Accounts receivable (net) Inventory Plant (net) Land 50,000 35,000 100,000 120,000 300,000 Liabilities Accounts payable Provision for annual leave Accrued penalties Rent received in advance Loan payable 40,000 50,000 30,000 20,000 150,000 . . Additional information: Company tax rate is 30 percent. There is an accumulated allowance for doubtful debts of $5,000. The plant was purchased on 1 July 2017 for $200,000, with an expected life of use for 5 years and a residual value of zero. FRED Ltd applies straight-line depreciation. For tax purpose, it is depreciated over 4 years with a residual value of zero. Land costs $200,000 and is revalued up by $100,000 for the year ending 30 June 2019. Goodwill is fully impaired as at 30 June 2019. There is an opening balance of deferred tax assets of $30,500. There is an opening balance of deferred tax liabilities of $20,000. In the previous year, FRED made a tax loss of $15,000 which was recognised as a deferred tax asset. . . . Required(Show any necessary calculations and round your answers to the nearest whole dollar): (a) Calculate current tax payable as at 30 June 2019. Your answer needs illustrate detailed steps that you use for calculation. (4 marks) S Accounting profit Add: 37,000 Deduct: (b) Complete the following table and calculate deferred tax asset and deferred tax liability balances as at 30 June 2019. Your answer needs illustrate detailed steps that you use for calculation. (6 marks) Carrying Amount Future Future Tax Taxable Deductibl Base Amount e Amount S $ Deductible Taxable Temporary Temporary Differences Differences $ $ $ Relevant Assets Prepaid insurance Accounts receivable (net) Plant (net) Land Relevant Liabilities Provision for annual leave Rent received in advance Temporary diff DTL DTA (0) Prepare the journal entries related to income tax expenses for the year ended 30 June 2019. (5 marks) (d) Suppose that in November 2018, the company received an amended assessment for the year ended 30 June 2018 from the tax authority. The amendment notice indicated that an amount of 5,000 claimed as a deduction had been disallowed. Explain what impact this amendment will have on income taxes for the year ended 30 June 2019. No calculation is needed for this question. (2 marks) Please select file(s) Select file(s) Q7 Tax Accounting 17 Points You are provided with the following information from the accounts of FRED Ltd for the year ending 30 June 2019. The accounting profit before income tax is $37,000. Numbers are in Australian Dollars. Entertainment expense 4,000 Depreciation expense Plant 40,000 Rent expense 10,000 Doubtful debts expense 4,000 Provision for employees' annual leave 3,000 Goodwill impairment expense 7,000 Extract from Balance Sheet 30 June 2019 Assets Prepaid insurance Accounts receivable (net) Inventory Plant (net) Land 50,000 35,000 100,000 120,000 300,000 Liabilities Accounts payable Provision for annual leave Accrued penalties Rent received in advance Loan payable 40,000 50,000 30,000 20,000 150,000 . . Additional information: Company tax rate is 30 percent. There is an accumulated allowance for doubtful debts of $5,000. The plant was purchased on 1 July 2017 for $200,000, with an expected life of use for 5 years and a residual value of zero. FRED Ltd applies straight-line depreciation. For tax purpose, it is depreciated over 4 years with a residual value of zero. Land costs $200,000 and is revalued up by $100,000 for the year ending 30 June 2019. Goodwill is fully impaired as at 30 June 2019. There is an opening balance of deferred tax assets of $30,500. There is an opening balance of deferred tax liabilities of $20,000. In the previous year, FRED made a tax loss of $15,000 which was recognised as a deferred tax asset. . . . Required(Show any necessary calculations and round your answers to the nearest whole dollar): (a) Calculate current tax payable as at 30 June 2019. Your answer needs illustrate detailed steps that you use for calculation. (4 marks) S Accounting profit Add: 37,000 Deduct: (b) Complete the following table and calculate deferred tax asset and deferred tax liability balances as at 30 June 2019. Your answer needs illustrate detailed steps that you use for calculation. (6 marks) Carrying Amount Future Future Tax Taxable Deductibl Base Amount e Amount S $ Deductible Taxable Temporary Temporary Differences Differences $ $ $ Relevant Assets Prepaid insurance Accounts receivable (net) Plant (net) Land Relevant Liabilities Provision for annual leave Rent received in advance Temporary diff DTL DTA (0) Prepare the journal entries related to income tax expenses for the year ended 30 June 2019. (5 marks) (d) Suppose that in November 2018, the company received an amended assessment for the year ended 30 June 2018 from the tax authority. The amendment notice indicated that an amount of 5,000 claimed as a deduction had been disallowed. Explain what impact this amendment will have on income taxes for the year ended 30 June 2019. No calculation is needed for this question. (2 marks) Please select file(s) Select file(s)