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Question 1 Bax Ltds statement of profit or loss for the year ended 30 June 2017 and extracts from its statements of financial position as

Question 1

Bax Ltds statement of profit or loss for the year ended 30 June 2017 and extracts from its statements of financial position as at 30 June 2017 and 30 June 2016 are shown below. The statements for the current year are yet to be finalised by accounting for income tax.

Bax Ltd

Statement of Profit or Loss

for the year ending 30 June 2017

Income

Service revenue

$ 900 000

Rent revenue

50 000

Insurance claim for loss of profits

41 200

991 200

Less: Expenses

Employee expenses

660 000

Insurance expense

50 000

Accounting fees

5 500

Bad and doubtful debts

19 500

Cleaning and maintenance

3 250

Depreciation of equipment

5 500

Entertainment expenses

4 000

Interest on borrowings

75 000

Legal fees

3 800

Motor vehicle expenses

6 000

Other

3 750

Restructuring costs

23 000

859 300

Profit before tax

$ 131 900

1

Bax Ltd

Statement of Financial Position (Extract)

as at 30 June

2017

2016

Assets

Cash at bank

$ 900 100

$ 800 100

Trade debtors

240 550

200 000

Allowance for doubtful debts

(38 000)

(20 000)

Prepaid insurance

10 950

5 000

Land at fair value

450 000

300 000

Equipment at cost

58 000

58 000

Accumulated depreciation

(24 500)

(19 000)

Other debtors

142 400

Deferred tax asset

?

18 000

Liabilities

Trade creditors

239 000

245 000

Borrowings

543 800

438 500

Unearned rent revenue

50 000

Provision for employee benefits

49 500

40 000

Provision for restructuring

23 000

Other creditors

10 000

Current tax liability

13 300

Deferred tax liability

?

32 700

Additional information

The original cost of the land is $200 000.

The tax written down value of equipment at 30 June 2017 is $28 000 (2016: $35 000). During the 2017 year, there were no additions or disposals of equipment.

Legal fees of $3800 are capital in nature and non-deductible for tax purposes.

Other creditors at 30 June 2017 include an accrual for accounting fees of $4500 for work not yet performed (2016: $Nil). For tax purposes, the accounting fees are deductible only if work has been performed.

For tax purposes, restructuring costs are deductible only when paid.

Other debtors at 30 June 2017 include $41 200 relating to an insurance claim that is in-process. Insurance income is only assessable for tax purposes after the insurance proceeds have been received.

The corporate tax rate is 30%.

Required:

1. Prepare the deferred tax worksheet at 30 June 2017 and the deferred tax entries for the year.

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