Question 1

The following represented an extract from the Statement of Financial Position of Nadi Ltd for the years ending 30 June 2010 and 30 June 2011. Reporting date was 30 June.

Assets 2011 2010 Liabilities 2011 2010

Cash 110 000 87 000 Accounts payable 28 500 31 700

Accounts receivables (net) 45 000 52 000 Accrued expenses 7 200 11 600

Inventory 58 000 43 000 Deferred tax liability ? 15 150

Interest receivable 8 400 5 000 Rent received in advance 12 000 -

Prepaid insurance 7 000 5 000 Bank loan 50 000 50 000

Deferred tax asset ? 10 470 Provision for employee benefits 21 000 17 300

Development cost 32 000 32 000

Less Accumulated amortisation (8 000) -

Property plant and equipment 75 000 75 000

Less Accumulated amortisation (22 000) (13 500)

You were appointed as a graduate accountant at Nadi Ltd after graduation from USP in January 2011. You were requested to prepare the deferred tax worksheet for the business for year ended 2011. After a meeting with your supervisor, you gathered the following information you thought you might need for your work:

The balance of allowance for doubtful debts for 2011 and 2010 was $5,000 and $6,000 respectively.

Interest revenue was assessable when the cash was received.

Insurance was deductible when paid.

Development costs were deductible when paid together with an additional deduction of 50%.

Accrued expenses were deductible when paid.

Rent revenue was assessable when the cash was received.

Employee benefits were deductible when the payment was made to the employee.

The tax depreciation rate for plant and equipment was double the rate of accounting.

The tax rate was 30%.

Required:

How to prepare a deferred tax worksheet to calculate the amount of adjustment required for deferred tax assets and deferred tax liabilities. Use the following format for the worksheet:

Carrying amount Tax base Deductible temporary difference Taxable temporary difference