Question 1 Tax effect accounting (60 marks) Camberwell Services Ltd. had a before-tax profit as reported on its Statement of Comprehensive Income of $400,493 for the year ended 30 June 2019. The following revenue and expenses were included in that statement: $ Rent revenue 30,000 Government grant 10,000 Bad debt expense 60,000 Depreciation - building 8,000 Depreciation - plant 50,000 Depreciation - motor vehicles 55,000 Employee benefit expense 75,000 Office supplies expense 15,000 Entertainment expenses 18,000 Interest revenue 36,000 An extract from the companys draft Statement of Financial Position for 2019 and 2018 showed

the following assets and liabilities, with the current deferred tax asset and liability balance to be determined:

2019 2018 Assets Cash 80,000 85,000 Inventory 170,000 155,000 Interest receivable 40,000 20,000 Trade receivable 500,000 480,000 Provision for bad and doubtful debts (55,000) (40,000) Office supplies 25,000 22,000 Land * 750,000 650,000 Building 300,000 300,000 Accumulated depreciation - building (148,000) (140,000) Plant 500,000 500,000 Accumulated depreciation - plant (260,000) (210,000) Motor Vehicles 165,000 165,000 Accumulated depreciation - motor vehicles (132,000) (115,500) Goodwill 70,000 70,000 Deferred tax asset ? 40,500 Liabilities Trade payables 290,000 260,000 Provision for employee benefits 100,000 75,000 Rent received in advance 25,000 20,000 Deferred tax liability ? 38,100 Additional information a. Depreciation of buildings and entertainment expenses are not recognised tax deductions. b. The start-up government grant is not treated as assessable income by the Australian Taxation Office. c. Office supplies are claimed as a deduction when purchased. $15,000 of supplies were expensed (used) during the year. d. Land, which had originally cost $650,000 was revalued in 2019. e. Accumulated depreciation of the plant for tax purposes was $315,000 at 30 June 2018 and depreciation for tax purposes for the year ended 30 June 2019 amounted to $75,000. f. Accumulated depreciation of motor vehicles for tax purposes was $46,200 at 30 June 2018 and depreciation for tax purposes for the year ended 30 June 2019 amounted to $33,000. g. In the previous year, Camberwell Services Ltd made a tax loss of $29,630 and recognised a deferred tax asset in respect of this loss. h. The company pays tax in quarterly instalments. The following payments were made during the year ended 30 June 2019: 28 July 2018 (final payment for 30 June 2018) $22,500 28 October (first payment for 30 June 2019) $31,420 28 February (second payment for 30 June 2019) $30,380 28 April (third payment for 30 June 2019) $31,750 i. the tax rate for the year ended 30 June 2019 was 30%, and no tax-related journal entries, other than for revaluation of land, have been recorded for the year ended 30 June 2019. j. Assume the tax balances as at 30 June 2018 are correct.

Required: 1. Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2019 (show all working). (25 Marks) 2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2019. Include all accounts and net balances where appropriate. Show workings where required. (32 Marks) 3. Prepare the journal entries to recognise the current tax liability, deferred tax assets, and liabilities at 30 June 2019. (3 Marks)