Question 1 18 Marks

X Ltd has determined its accounting profit before tax for the year ended 30 June 2020 to be $133,440. Included in this profit are the items of revenue and expense shown below.

Doubtful debts expense	$ 16,200
Depreciation expense plant	$ 48,000
Insurance expense	$ 25,800
Annual leave expense	$ 30,800
Government grant (nontaxable)	$ 11,000
Entertainment expense (nondeductible)	$ 16,400
Gain on sale of plant	$ 6,000

The draft statement of financial position as at 30 June 2020 included the following assets and liabilities:

	2020	2019
Accounts receivable	$ 312,000	$ 295,000
Allowance for doubtful debts	$ (13,600)	$ (10,400)
Prepaid insurance	$ 6,800	$ 11,200
Plant	$ 480,000	$ 580,000
Accumulated depreciation plant	$ (268,800)	$(260,800)
Deferred tax asset	?	$ 19,980
Provision for annual leave	$ 28,200	$ 19,400
Deferred tax liability	?	$ 19,008

Additional information

For tax purposes, the carrying amount of plant sold was $52,000. This sale was the only movement in plant for the year.

Question 1 continues on next page

Question 1 (continued)

The tax deduction for plant depreciation was $57,600. Accumulated depreciation at 30 June 2019 for taxation purposes was $312,960.

In the previous year, X Ltd had made a tax loss of $36,800. X Ltd recognised a deferred tax asset in respect of this loss.

The tax rate is 30%.

Required:

1. Prepare the current tax worksheet and journal entry/entries to calculate and record the current tax for the year ended 30 June 2020. (11 marks)
2. Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts for the year ended 30 June 2020. (7 marks)