Question 3 [15 marks] Accounting for income tax Tulip Ltd commenced business on 1 July 2018, with share capital of $700,000. The following information is available for the year ended 30 June 2019 Calculation of profit for the year ended 30 June 2019 Income: 1430 000 Revenae Royalty (exempt from income tax) 10 000 Expenses Cost of sales 725 000 Advertising expense Annual leave expense Depreciation-equipment Depreciation-motor vehicles Doubtful debes expense 204 000 24 000 35 000 20 000 14 000 Entertainment (not tax deductible) 2000 Insurance expense Interest expense Motor vehicle expenses Rent expense Repairs and maintenance Salaries and wages 14 000 17 000 3000 87 000 6000 298 000 Telephone 5000 18 000 42 000 1514000 Warranty expenses Other expenses Accounting profitlass) before tax (74 000 Assets and liabilities as at 30 June 2019 Assets Cash 12 000 Inventory Accounts receivable 146 000 193 000 Less: allowance for doubtful debes12 000) 181 000 Prepaid insurance Equipment-cost Less: accumulated depreciation 3 000 400 000 35 000) 150 000 20 000 365 000 Motor vehicles-cost 130000 Less: accumulated depreciation Total assets 837 000 Liabilities Accounts payable Bank loan 4000 170 000 Provision for annual leave 22 000 Provision for warranties 15 000 Total liabilities 211000 Additional information Additional information .The directors have advised that they did spend a significant amount of money on advertising and salaries and wages during 2019, as Tulip Ltd sought to market the business and its products to consumers. The directors expect to see significant profits in the next financial year given the success of their advertising campaigns. .The company purchased equipment at a cost of $400,000 on 1 July 2018. The equipment is depreciated over eight years for accounting purposes, and five years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $120,000) The company purchased motor vehicles at a cost of S150,000 on 1 July 2018. The motor vehicles are depreciated over six years for accounting purposes, and eight years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $30,000) Tax deductions for annual leave, warranties, insurance are available when the amounts are paid, and not as amounts are accrued. . Amounts received from sales, including those on credit terms, are taxed at the time the sale is made .Tax deductions are not available for doubtful debts. Tax deductions are only available when bad debts are written off. . The tax rate is 30%. Required: Determine the balance of any current tax liability and deferred tax assets and deferred tax liabilities for Tulip Ltd as at 30 June 2019, in accordance with AASB 112. Use appropriate worksheets and show all necessary workings i liability and deferred tax assets and deferred tax liabilities Prepare the journal entries to record the current tax Question 3 [15 marks] Accounting for income tax Tulip Ltd commenced business on 1 July 2018, with share capital of $700,000. The following information is available for the year ended 30 June 2019 Calculation of profit for the year ended 30 June 2019 Income: 1430 000 Revenae Royalty (exempt from income tax) 10 000 Expenses Cost of sales 725 000 Advertising expense Annual leave expense Depreciation-equipment Depreciation-motor vehicles Doubtful debes expense 204 000 24 000 35 000 20 000 14 000 Entertainment (not tax deductible) 2000 Insurance expense Interest expense Motor vehicle expenses Rent expense Repairs and maintenance Salaries and wages 14 000 17 000 3000 87 000 6000 298 000 Telephone 5000 18 000 42 000 1514000 Warranty expenses Other expenses Accounting profitlass) before tax (74 000 Assets and liabilities as at 30 June 2019 Assets Cash 12 000 Inventory Accounts receivable 146 000 193 000 Less: allowance for doubtful debes12 000) 181 000 Prepaid insurance Equipment-cost Less: accumulated depreciation 3 000 400 000 35 000) 150 000 20 000 365 000 Motor vehicles-cost 130000 Less: accumulated depreciation Total assets 837 000 Liabilities Accounts payable Bank loan 4000 170 000 Provision for annual leave 22 000 Provision for warranties 15 000 Total liabilities 211000 Additional information Additional information .The directors have advised that they did spend a significant amount of money on advertising and salaries and wages during 2019, as Tulip Ltd sought to market the business and its products to consumers. The directors expect to see significant profits in the next financial year given the success of their advertising campaigns. .The company purchased equipment at a cost of $400,000 on 1 July 2018. The equipment is depreciated over eight years for accounting purposes, and five years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $120,000) The company purchased motor vehicles at a cost of S150,000 on 1 July 2018. The motor vehicles are depreciated over six years for accounting purposes, and eight years for taxation purposes (using the straight-line basis of depreciation, and a residual value of $30,000) Tax deductions for annual leave, warranties, insurance are available when the amounts are paid, and not as amounts are accrued. . Amounts received from sales, including those on credit terms, are taxed at the time the sale is made .Tax deductions are not available for doubtful debts. Tax deductions are only available when bad debts are written off. . The tax rate is 30%. Required: Determine the balance of any current tax liability and deferred tax assets and deferred tax liabilities for Tulip Ltd as at 30 June 2019, in accordance with AASB 112. Use appropriate worksheets and show all necessary workings i liability and deferred tax assets and deferred tax liabilities Prepare the journal entries to record the current tax