QUESTION 5: INCOME TAX EXPENSE (10 MARKS)

PART A: Prepare a current tax worksheet (5 MARKS)

You are required to account for income tax for the year ending 30 June 2022.

Relevant information is as follows:

Accounting profit before tax $ 200,000

Cash interest received $ 10,000

Interest revenue $ 8,000

Warranty expense $ 20,000

Warranty Paid $ 25,000

Corporate tax rate 30%

Required: Prepare the current tax worksheet and the current tax journal entry for 30.6.22.

PART B: Prepare income tax adjustment for the following items (5 MARKS)

ABC Limited accrued $10,000 for interest expense in the year ended 30 June 2022. This item will not be tax deductible until it is paid. If the company tax rate is 30%. What is the tax effect adjustment entry on 30 June 2022? (2 MARKS)

At 30 June 2021, ABC Ltd recognised a deferred tax asset of $12 000 and a deferred tax liability of $6 000. This has resulted by applying a tax rate of 30%. The Australian government has determined to raise more revenue from companies by way of taxation. It announced that it will increase the tax rate as of 1 July 2021 to 35%. Prepare tax effect adjustment entry on 30 June 2022. (3 MARKS)