QUESTION 2(20 Marks) From the following information relating to Swintopia Ltd at June 30, 2022 prepare all the necessary entries for tax effect accounting: Swintopia reported a net profit before income tax of $870,000 for the year. The net profit was determined after charging the following items : . Entertainment expenses $5,000 Depreciation on Buildings $15,000 Allowance for doubtful debts $9,000 Increase in the provision for Annual leave Depreciation on Vehicles $20,000 Goodwill impairment $15,000 . $12,000 An extract of the Statement of Financial Position as at June 30, 2022 for accounting and tax purposes appears as follows: Carrying Amt Tax Base Assets Cash at Bank Accounts Receivable Buildings 550,000 Less accumulated depreciation 15,000 Motor Vehicles 90,000 Less accumulated depreciation 20,000 85,000 85,000 63,000 68,000 550,000 565,000 0 550,000 90,000 70,000 25,000 65,000 753,000 768,000 Liabilities 35,0001 Accounts payable Provision for Annual leave Motor Vehicle Lease 0 35,0001 4,000 45,000 84,000 45,000 80,000 Net Assets 669,000 688,000 Additional Information: . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) Annual leave paid during the year was $8,000 . Additional Information: . . . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) Annual leave paid during the year was $8,000 The rate of income tax is 30% Required: 1. Prepare a schedule to calculate taxable income 2. Calculate: a. Taxable temporary differences b. Deductible temporary differences 3. Prepare the journal entries to account for income tax expense in accordance with AASB112, recording: - a. Income tax expense b. Deferred Tax asset c. Deferred Tax liability d. Any other relevant journals. 4. Prepare a statement reconciling pre-tax profit to taxable income 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income $ $ Jadd non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying Amt Tax Base TTD DTD Assets CA- TB TB - CA 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income $S add non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying Amt Tax Base TTD DTD Assets CA - TB TB - CA Liabilities TB - CACA - TB Net Assets 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DATE DETAILS DR CR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) Reconciliation DATE DETAILS DR CR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) Reconciliation . +/- permanent differences . +/- temporary differences Taxable Income 5a . What is the objective of Accounting standard AASB112? (2 marks) 5b. Why is there a difference between accounting profit and taxable income? (2 marks ) Department Details Author: Sue Rollnik Date created Date last updated: 9/8/2021 File name: FNSACC514 Prepare financial reports for Corporate Entitios S2 2021 Version: Template Details Author: VE Quality and Policy Version 1.1 Date created: 07 December 2018 Date last updated: 21 December 2018 Location: VE Staff Wiki/Quality Quality Life Cycle/Plan Page 4 of 5 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income Jadd non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying AmtTax Base TTD DTD Assets CA - TB| TB - CA Liabilities TB - CACA-TB Net Assets 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DETAILS DRCR 30/6/2022 DATE 4. Reconciliation of pre-tax profit to taxable income (4 marks) QUESTION 2(20 Marks) From the following information relating to Swintopia Ltd at June 30, 2022 prepare all the necessary entries for tax effect accounting: Swintopia reported a net profit before income tax of $870,000 for the year. The net profit was determined after charging the following items : . Entertainment expenses $5,000 Depreciation on Buildings $15,000 Allowance for doubtful debts $9,000 Increase in the provision for Annual leave Depreciation on Vehicles $20,000 Goodwill impairment $15,000 . $12,000 An extract of the Statement of Financial Position as at June 30, 2022 for accounting and tax purposes appears as follows: Carrying Amt Tax Base Assets Cash at Bank Accounts Receivable Buildings 550,000 Less accumulated depreciation 15,000 Motor Vehicles 90,000 Less accumulated depreciation 20,000 85,000 85,000 63,000 68,000 550,000 565,000 0 550,000 90,000 70,000 25,000 65,000 753,000 768,000 Liabilities 35,0001 Accounts payable Provision for Annual leave Motor Vehicle Lease 0 35,0001 4,000 45,000 84,000 45,000 80,000 Net Assets 669,000 688,000 Additional Information: . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) Annual leave paid during the year was $8,000 . Additional Information: . . . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) Annual leave paid during the year was $8,000 The rate of income tax is 30% Required: 1. Prepare a schedule to calculate taxable income 2. Calculate: a. Taxable temporary differences b. Deductible temporary differences 3. Prepare the journal entries to account for income tax expense in accordance with AASB112, recording: - a. Income tax expense b. Deferred Tax asset c. Deferred Tax liability d. Any other relevant journals. 4. Prepare a statement reconciling pre-tax profit to taxable income 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income $ $ Jadd non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying Amt Tax Base TTD DTD Assets CA- TB TB - CA 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income $S add non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying Amt Tax Base TTD DTD Assets CA - TB TB - CA Liabilities TB - CACA - TB Net Assets 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DATE DETAILS DR CR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) Reconciliation DATE DETAILS DR CR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) Reconciliation . +/- permanent differences . +/- temporary differences Taxable Income 5a . What is the objective of Accounting standard AASB112? (2 marks) 5b. Why is there a difference between accounting profit and taxable income? (2 marks ) Department Details Author: Sue Rollnik Date created Date last updated: 9/8/2021 File name: FNSACC514 Prepare financial reports for Corporate Entitios S2 2021 Version: Template Details Author: VE Quality and Policy Version 1.1 Date created: 07 December 2018 Date last updated: 21 December 2018 Location: VE Staff Wiki/Quality Quality Life Cycle/Plan Page 4 of 5 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income Jadd non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying AmtTax Base TTD DTD Assets CA - TB| TB - CA Liabilities TB - CACA-TB Net Assets 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DETAILS DRCR 30/6/2022 DATE 4. Reconciliation of pre-tax profit to taxable income (4 marks)