Question 3 Rose Hill Ltd has requested that you prepare the tax-effect accounting information for the year ended 30 June 2020. The following has been extracted from their internal reports - Accounting profit before tax for the year $ 855.000 - Expenses brought to account included: Depreciation - plant $ 85,000 Entertainment expense $9,000 Impairment loss on goodwill $18,000 Long service leave..... $ 15,000 Accumulated depreciation on plant for tax purposes was $181,000 on 30 June 2019 and 5291,000 on 30 June 2020. There were no additions or disposals of plant during the year, - Bad debts of $14,000 were written off during the year against the allowance for doubtful debts. - On 1 January 2020 the company income tax rate was reduced from 32% to 30%, effective for the 2019/20 tax year and onwards. The deferred tax opening balances on 1 July 2019 were: Deferred Tax Asset $ 24,000 Deferred Tax Liability $ 19,840 - Reporting date is 30 June Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2020 were: Assets Reporting date is 30 June. Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2020 were: Assets $234,000 Accounts Receivable. $ 248,000 Less: Allowance for Doubtful Debts [2019 $ 12,000)........... 14,000 Inventory Plant-cost.... $ 600,000 Less: Accumulated Depreciation - Plant 205,000 257,000 395,000 Liabilities $182,000 68,000 Accounts Payable Provision for long-service leave (2019 $ 62,000).. Required: Provide the journal entry to adjust the opening deferred tax accounts due to the tax rate change. (Narrations are required) (2 marks) (1) Show the calculation of income tax expense and income taxable payable. (8 marks) Question 3 Rose Hill Ltd has requested that you prepare the tax-effect accounting information for the year ended 30 June 2020. The following has been extracted from their internal reports - Accounting profit before tax for the year $ 855.000 - Expenses brought to account included: Depreciation - plant $ 85,000 Entertainment expense $9,000 Impairment loss on goodwill $18,000 Long service leave..... $ 15,000 Accumulated depreciation on plant for tax purposes was $181,000 on 30 June 2019 and 5291,000 on 30 June 2020. There were no additions or disposals of plant during the year, - Bad debts of $14,000 were written off during the year against the allowance for doubtful debts. - On 1 January 2020 the company income tax rate was reduced from 32% to 30%, effective for the 2019/20 tax year and onwards. The deferred tax opening balances on 1 July 2019 were: Deferred Tax Asset $ 24,000 Deferred Tax Liability $ 19,840 - Reporting date is 30 June Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2020 were: Assets Reporting date is 30 June. Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2020 were: Assets $234,000 Accounts Receivable. $ 248,000 Less: Allowance for Doubtful Debts [2019 $ 12,000)........... 14,000 Inventory Plant-cost.... $ 600,000 Less: Accumulated Depreciation - Plant 205,000 257,000 395,000 Liabilities $182,000 68,000 Accounts Payable Provision for long-service leave (2019 $ 62,000).. Required: Provide the journal entry to adjust the opening deferred tax accounts due to the tax rate change. (Narrations are required) (2 marks) (1) Show the calculation of income tax expense and income taxable payable. (8 marks)
