Question 2 20 Marks Navara Ltd commences operations on 1 July 2019. One year later, on 30 June 2020, Navara Ltd prepares its rst statement of comprehensive income and its rst statement of nancial position. The statements are prepared before considering taxation. The following information is available. Statement of comprehensive income for the year ended 30 June 2020 Sales revenue $2,400,000 Cost of goods sold 1,400,000 Gross prot 1,000,000 Wages and salaries expense (400,000) Doubtful debt expense (40,000) Insurance expense (100,000) Long service leave expense (100,000) Depreciation expense Plant [60,0001 Accoun g mt before tax 300,000 Assets and Liabilities extracted from Statement of Financial Position as at 30 June 2020 Assets Cash $300,000 Accounts receivables (net) 360,000 Inventories 400,000 Prepaid insurance 100,000 Plant 300,000 Accumulated depreciation - Plant (60,0001 Total Assets 1,400,000 Liabilities Accounts payable 200,000 Revenue received in advance 100,000 Loan payable 400,000 Provision for long service leave 100,000 Total Labilities 800,000 Net Assets 600 000 Additional information All wages and salaries have been paid as at year end and are deductible for tax purposes. None of the long service leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid. The revenue received in advance is included in the taxable income. Insurance was initially prepaid to the amount of $200,000. At the year end the unused component of the prepaid insurance amounted $100,000. Actual amounts paid are allowed as a tax deduction. Amounts received om sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off. The plant is depreciated on a straight-line basis over 5 years for accounting purposes, but over 3 years for taxation purposes. The plant is not expected to have any residual value. The company tax rate is assumed to be 30%. .1 Question 2 (cont) Muired: (a) Calculate Navara m taxable income for the year ended 30 June 2020. (4.5 Marks). (b) Complete the Deferred Tax Worksheet provided on page 5 in accordance with AASB 112: Income Taxes. [Copy the table provided in page 5 and paste it in your answer document to complete the Deferred Tax Worksheet]. (12.5 Marks). (0) Prepare the applicable journal entries to record the tax adjustments as at 30 June 2020. (3 Marks). Navara Ltd Deferred tax worksheet at 30 June 2020 Carrying Tax Base Deductible Taxable Income Income tax Amount Temporary Temporary tax payable Differences Differences expense $ $ Assets Cash 300,000 300,000 Accounts receivables 360,000 400,000 Inventories 400,000 400,000 Prepaid rent 100,000 0 Equipment 240,000 200,000 Total Assets 1,400,000 1,300,000 Liabilities Accounts payable 200,000 200,000 Revenue received in 100,000 0 advance Loan Payable 400,000 400,000 Provision for long 100,000 0 service leave Total liabilities 800,000 600,000 Net Assets 600,000 700,000 Temporary Differences at period end Less prior period amounts Movement for the period Tax effected at 30% Tax on taxable income Income tax adjustmentsQuestion 3 14 Marks (a) Do you think that there are implications of the revaluation increments (upward revaluation) and revaluation decrements (downward revaluation) on rms' prot? 4 Marks (b) On 30 June 2020, the Mildura Ltd showed the following non-current assets after charging depreciation. Plant $150,000 Less Accumulated depreciation 50,000 Equipment $60,000 Less Accumulated depreciation 20,000 M0900 Mildura Ltd uses the fair value method for the valuation of non-current assets. The company hired an independent valuer on 30 June 2020 who assessed the fair value of the plant to be $80,000 and the equipment to be $45,000. Required: (i) Prepare journal entries to revalue the plant and the equipment as at 30 June 2020. 7 Marks (ii) Assume that the plant and equipment had remaining useful lives of 10 years and 5 years respectively, with zero residual value. Prepare journal entries to record depreciation expense for the year ended 30 June 2021 using the straight-line method 3 Marks [4 + 10 = 14 Marks] Note: Ignore tax effect