QUESTION 2 30 marks DaJen Ltd prepared a draft statement of profit and loss (P/L) for the year ended 30 June 2019 which showed a profit before tax of $24 420. The P/L included the following items of income and expense: Government grant (exempt from tax) Proceeds on sale of plant 5 000 23 000 Bad debts expense Depreciation expense - plant Insurance expense Long-service leave expense Impairment of goodwill | Carrying amount of plant sold 8 100 14 000 12 900 14 500 11 100 20 000 The statements of financial position of DaJen Ltd at 30 June 2019 and 30 June 2018 include the following assets and liabilities: 2018 DAJEN LTD Statement of Financial Position (Extract) as at 30 June 2019 Assets Cash 6 000 Accounts receivable 96 000 Allowance for doubtful debts (6 800) Prepaid insurance 3 400 Plant 140 000 Accumulated depreciation - plant (32 000) Goodwill 22 200 Accumulated impairment losses (11 100) Deferred tax asset Liabilities Accounts payable 78 000 Provision for long-service leave 13 200 Current tax liability Deferred tax liability 18 000 85 000 (5 200) 5 600 170 000 (28 000) 22 200 9540 76 000 9 700 3780 Additional information (a) For tax purposes the carrying amount of plant sold was $15 000. (b) The tax deduction for plant depreciation was $20 250. The accumulated depreciation on plant for tax purposes at 30 June 2019 is $40 250 (2018: $35 000). (c) In the year ended 30 June 2018, the company recorded a tax loss. At 1 July 2018 carry forward tax losses amounted to $16 900. The company recognised a deferred tax asset in respect of these tax losses at 30 June 2018. (d) Tax losses carried forward must be offset against any exempt income before being used to reduce taxable income. (e) The company does not set off deferred tax liabilities and assets and the corporate tax rate is 30%. Required A. Prepare the current tax worksheet for the year ended 30 June 2019 and the tax journal entries. 11 marks B. Prepare the deferred tax worksheet as at 30 June 2019 and the tax journal entries. 15 marks C. Discuss the factors the company should have considered before recognising a deferred tax asset with respect to the tax loss incurred in the year ended 30 June 2018? 4 marks QUESTION 2 30 marks DaJen Ltd prepared a draft statement of profit and loss (P/L) for the year ended 30 June 2019 which showed a profit before tax of $24 420. The P/L included the following items of income and expense: Government grant (exempt from tax) Proceeds on sale of plant 5 000 23 000 Bad debts expense Depreciation expense - plant Insurance expense Long-service leave expense Impairment of goodwill | Carrying amount of plant sold 8 100 14 000 12 900 14 500 11 100 20 000 The statements of financial position of DaJen Ltd at 30 June 2019 and 30 June 2018 include the following assets and liabilities: 2018 DAJEN LTD Statement of Financial Position (Extract) as at 30 June 2019 Assets Cash 6 000 Accounts receivable 96 000 Allowance for doubtful debts (6 800) Prepaid insurance 3 400 Plant 140 000 Accumulated depreciation - plant (32 000) Goodwill 22 200 Accumulated impairment losses (11 100) Deferred tax asset Liabilities Accounts payable 78 000 Provision for long-service leave 13 200 Current tax liability Deferred tax liability 18 000 85 000 (5 200) 5 600 170 000 (28 000) 22 200 9540 76 000 9 700 3780 Additional information (a) For tax purposes the carrying amount of plant sold was $15 000. (b) The tax deduction for plant depreciation was $20 250. The accumulated depreciation on plant for tax purposes at 30 June 2019 is $40 250 (2018: $35 000). (c) In the year ended 30 June 2018, the company recorded a tax loss. At 1 July 2018 carry forward tax losses amounted to $16 900. The company recognised a deferred tax asset in respect of these tax losses at 30 June 2018. (d) Tax losses carried forward must be offset against any exempt income before being used to reduce taxable income. (e) The company does not set off deferred tax liabilities and assets and the corporate tax rate is 30%. Required A. Prepare the current tax worksheet for the year ended 30 June 2019 and the tax journal entries. 11 marks B. Prepare the deferred tax worksheet as at 30 June 2019 and the tax journal entries. 15 marks C. Discuss the factors the company should have considered before recognising a deferred tax asset with respect to the tax loss incurred in the year ended 30 June 2018? 4 marks
