QUESTION 3: Accounting for Income Tax (22 marks) The accounting profit before tax for Wabbit Ltd for the year ended 30 June 2020 was $750,000 and included the following revenue and expense items: Depreciation of motor vehicle $7,500 Annual leave expense $120,000 Doubtful debts expense $35,000 Rent expense $28,000 Warranty expense $26,000 Fine for breach of waste disposal law $45,000 Additional information: The motor vehicle was purchased on 1 July 2015 for $65,000. The vehicle has an expected useful life of 8 years and a residual value of $5,000 and is depreciated using straight-line method for accounting purposes. Tax depreciates at 25% per annum straight line on cost. The balance of the provision for annual leave at the beginning of the period (1 July 2019) was $30,000. The rent expense relates to a property first rented by Wabbit Ltd inJanuary 2020. Rent is paid in arrears. The balance of the provision for warranty at the beginning of the period (1 July 2019) was $47,000. Total bad debts written off during the year were $25,000. Tax includes/treats annual leave, warranties and rent expense on a cash basis. Fines are not allowable as deductions for tax purposes. Bad/doubtful debts are only allowable as deductions when written off. Goodwill is not deductible for tax purposes. Assume the land is exempt for tax purposes (ie. No tax will be assessable if sold, and no deductions allowed). The tax rate is 30%.The extract from the statement of financial position for the company as at 30June 2020 is as follows: Assets Cash 80,000 Inventory 720,000 Accounts receivable 400,000 Allowance for Doubtful Debts 50,000 Deferred Tax Asset 45,000 Motor Vehicle 65,000 Accumulated Depreciation -Motor Vehicle 37,500 Land 350,000 Goodwill 100,000 Liabilities Accounts payable 60,000 Provision for Annual Leave 60,000 Rent expense payable 12,000 Provision for Warranty 19,000 Deferred Tax Liability 6,500 Loan 220,000 Required: (a) Prepare a statement reconciling accounting profit to taxable profit. 10 marks (b) Complete the attached tax effect worksheet and prepare all of the journal entries required to account for tax as at 30 June 2020. 12 marks