Question 1:

MyFinalWork Ltd commences operations on 1 July 2018 and presents its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2019. The statements are prepared before considering taxation. The following information is available:

Other information

All administration and salaries expenses incurred have been paid as at year end.

None of the long service leave expense has actually been paid.

Warranty expenses were accrued, and at year end, actual payments of $10 000 have been made (leaving an accrued balance of $20 000).

Insurance was initially prepaid to the amount of $30 000. At year end, the unused component of the prepaid insurance amounted to $10 000.

Amounts received from sales, including those on credit terms, are taxed at the time of sale is made.

The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes.

The tax rate is 30 per cent

Required:

A. Compute the following for MyFinalWork Ltd as at 30 June 2019:

Taxable Income

Deductible Temporary Differences

Taxable Temporary Differences

Current Tax Liability

Income Tax Expense

B. Prepare journal entries for MyFinalWork Ltd as at 30 June 2019 to account for tax in accordance with AASB 112

Statement of profit or loss and other comprehensive income for the year ended 30 June 2019 Gross Profit 730,000 Expenses Administration expenses 80,000 Salaries 200,000 Long-service Leave 20,000 Warranty expenses 30,000 Depreciation expense - plant 80,000 Insurance 20,000 430,000 Accounting profit before tax 300,000 Other comprehensive income Nil Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019 Assets Cash 20,000 Inventory 100,000 Accounts receivable 100,000 Prepaid Insurance 10,000 Plant -cost 400,000 Less: Accumulated depreciation 80,000 320,000 Total assets 550,000 Liabilities Accounts payable 80,000 Provision for warranty expenses 20,000 Loan payable 200,000 Provision for long service leave expenses 20,000 Total liabilities 320,000 Net assets 230,000