Question 1: Topic 1 - Accounting for Company tax (30 marks)

Jamie Ltds profit before tax for the year ended 30 June 2020 was $172,400. Included in this profit are the following items of income and expense:

Amortisation of development costs	$12,000
Carrying amount of equipment sold	11,000
Depreciation building (6%)	15,000
Depreciation equipment (15%)	15,000
Depreciation motor vehicle (20%)	5,800
Doubtful debts expense	1,700
Employee benefits expense	7,000
Entertainment expense	3,500
Fines and penalties	4,400
Goodwill impairment	2,000
Insurance expense	1,400
Interest revenue	800
Proceeds on sale of equipment	19,000
Rent revenue	15,000
Royalty revenue (exempt income)	3,000
Warranty expense	7,000

At 30 June, the companys draft statements of financial position showed the following balances:

	2020	2019
Assets
Cash	$14,300	$10,200
Accounts receivable	18,000	22,000
Allowance for doubtful debts	(2,000)	(3,500)
Inventories	33,000	43,500
Interest receivable	800	1,200
Prepaid Insurance	4,000	4,200
Rent receivable	3,900	3,700
Development costs	48,000	-
Accumulated amortisation	(12,000)	-
Motor vehicle	29,000	29,000
Accumulated depreciation	(23,200)	(17,400)
Equipment	100,000	120,000
Accumulated depreciation	(60,000)	(54,000)
Buildings	250,000	250,000
Accumulated depreciation	(90,000)	(75,000)
Deferred tax asset	?	24,060
Goodwill	12,000	12,000
Goodwill - accumulated impairment losses	(5,000)	(3,000)
Liabilities
Accounts payable	27,000	24,500
Current tax liability	?	7,600
Provision for employee benefits	12,500	8,000
Provision for warranties	8,700	4,200
Mortgage loan	160,000	150,000
Deferred tax liability	?	4,275

Additional information:

1. A tax deduction for development costs on 125% of the amount spent during the year is available under the Tax Act. The profit reflects the amount of development costs amortised in the current period.
2. A tax deduction of $10,000 (10%) can be claimed on equipment.
3. The motor vehicle is depreciated at 25% for tax purposes.
4. The equipment sold on 1 July 2019 cost $20,000 when it was purchased 3 years before the date of sale.
5. Deductions are only available for annual leave when amounts are paid and not as they are accrued.
6. Actual amounts paid for insurance are allowed as a tax deduction.
7. No deduction is allowed for taxation purposes in relation to entertainment, fines, and penalties.
8. Rent revenue and interest are taxable when amounts are received.
9. Depreciation of buildings is not allowed as a tax deduction.
10. The deferred tax asset (DTA) balance at 30 June 2019 comprised: a) DTAs relating to temporary differences: $10,110 b) DTAs relating to carried forward tax losses: $13,950
11. No journal entries related to deferred tax have been recorded for the year ended 2020. Assume the tax balances at 30 June 2019 are correct.
12. The tax rate is 30%.

Required:

1. Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2020 (show all working). (15 marks)
2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2020. Include all accounts and net balances where appropriate. (13 marks)
3. Prepare the journal entries to recognise the current tax liability, deferred tax assets, and liabilities at 30 June 2020. (2 marks)