Question 1

At 30 June 2019, Beta Ltd had the following deferred tax balances:

Deferred tax liability $18,000Deferred tax asset 15,000Beta Ltd recorded a profit before tax of $80,000 for the year to 30 June 2020, which included the

following items:

Depreciation expense - plant

Doubtful debts expense $7,000

3,000Long-service leave expense 4,000For taxation purposes the following amounts are allowable deductions for the year to 30 June 2020:

Tax depreciation - plant

Bad debts written off $8,000

2,000Depreciation rates for taxation purposes are higher than for accounting purposes. A corporate tax rate

of 30% applies.

Required:

a) Determine the taxable income and income tax payable for the year to 30 June 2020. (2.5 Marks)

b) Determine by what amount the balances of the deferred liability and deferred tax asset will

increase or decrease for the year to 30 June 2020 because of depreciation, doubtful debts and

long-service leave. (3 marks)

c) Prepare the necessary journal entries to account for income tax assuming recognition criteria are

satisfied. (2.5 marks)

d) What are the balances of the deferred tax liability and deferred tax asset at 30 June 2020? (2

marks)