Question
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 |
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| Statement of Profit or Loss |
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for the year ending 30 June 2017 |
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Income |
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Service revenue | $ 900 000 |
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Rent revenue | 50 000 |
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Insurance claim for loss of profits | 41 200 |
| 991 200 | |||
Less: Expenses |
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Employee expenses | 660 000 |
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Insurance expense | 50 000 |
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Accounting fees | 5 500 |
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Bad and doubtful debts | 19 500 |
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Cleaning and maintenance | 3 250 |
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Depreciation of equipment | 5 500 |
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Entertainment expenses | 4 000 |
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Interest on borrowings | 75 000 |
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Legal fees | 3 800 |
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Motor vehicle expenses | 6 000 |
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Other | 3 750 |
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Restructuring costs |
| 23 000 |
| 859 300 | ||
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Profit before tax |
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| $ 131 900 |
1
| Bax Ltd |
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Statement of Financial Position (Extract) |
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| as at 30 June |
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| 2017 | 2016 |
Assets |
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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 |
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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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