QUESTION 3

Klover Ltd commences operations on 1 July 2018.On the same day it purchases machinery at a cost of $600 000.The machine is expected to have a useful life of four years, with benefits being uniform throughout its life.It will have no residual value at the end of the four years.For taxation purposes however, the allowable deduction for depreciation is based on three years.

The accounting profit before tax based on accrual accounting concepts for each of the next four years ending 30 June 2019, 2020, 2021 and 2022 is $500 000, $600 000, $700 000, and $800 000 respectively.The company tax rate is 30%.

Required

Prepare separate journal entries (include narrations) to account for both the current tax consequences and future tax consequences for the year ending 30 June 2020 showing all workings.