Question: Calculate deferred tax asset and deferred tax liability balances as at 30th June 2020. Prepare the deferred tax journal entries for the year ended 30th June 2020. Note that you are NOT required to prepare journals to offset the deferred tax asset and deferred tax liability balances
Background information The profit before tax, reported in the statement of comprehensive income of SuperX Ltd for the year ended 2020 amounted to: 3,420,000 Subscription revenue 106,000 Government award income 192,000 Doubtful debts expense 21,000 Depreciation (Equipment) 277,800 Depreciation (Buildings) 34,000 Maintenance expense 96,000 Employee benefits expense 64,000 Rent expense 32,000 Entertainment expense 53,400 The draft statements of financial position of the company at 30 June 2020 and 2019 showed the following assets and 2020 ($) 2019 ($) Assets Cash 224,000 245,000 Inventory 480,000 438,000 Accounts receivable 1,389,000 1,325,000 Allowance for doubtful debts -111,000 -102,000 Prepaid rent 59,000 55,000 Equipment 1,389,000 1,389,000 Accumulated depreciation - Equipment -833,400 -555,600 Buildings 855,000 855,000 Accumulated depreciation - Buildings -342,000 -307,000 Land 534,000 534,000 Goodwill (net) 213,000 213,000 Deferred tax asset ? 52,230 Liabilities Accounts payable Provision for maintenance Provision for employee benefits Subscription received in advance Deferred tax liability 812,000 171,000 117,000 74,000 ? 726,000 128,000 85,000 53,000 0 Additional Information: Subscription revenue is tax assessable when it is received in cash Government award income is not tax assessable Doubtful debts are tax deductible when the company actually incurs bad debts/write off For accounting purpose, the equipment is depreciated using the annual straight line method at a rate of: For tax purpose, however, the equipment is depreciated using the annual straight line method at a rate of: Depreciation of buildings is not allowed as tax deductions and goodwill is not tax assessable Employee benefits are tax deductible when they are paid in cash to the employees Rent expense and maintenance expense are tax deductible when paid in cash Entertainment expense is not allowed as tax deduction Assume a tax rate for the financial years ending 30 June 2019 and 2020 to be: 20% 25% 30% Calculate deferred tax asset and deferred tax liability balances as at 30th June 2020. Prepare the deferred tax journal entries for the year ended 30th June 2020. Journal entry: Dr Cr Background information The profit before tax, reported in the statement of comprehensive income of SuperX Ltd for the year ended 2020 amounted to: 3,420,000 Subscription revenue 106,000 Government award income 192,000 Doubtful debts expense 21,000 Depreciation (Equipment) 277,800 Depreciation (Buildings) 34,000 Maintenance expense 96,000 Employee benefits expense 64,000 Rent expense 32,000 Entertainment expense 53,400 The draft statements of financial position of the company at 30 June 2020 and 2019 showed the following assets and 2020 ($) 2019 ($) Assets Cash 224,000 245,000 Inventory 480,000 438,000 Accounts receivable 1,389,000 1,325,000 Allowance for doubtful debts -111,000 -102,000 Prepaid rent 59,000 55,000 Equipment 1,389,000 1,389,000 Accumulated depreciation - Equipment -833,400 -555,600 Buildings 855,000 855,000 Accumulated depreciation - Buildings -342,000 -307,000 Land 534,000 534,000 Goodwill (net) 213,000 213,000 Deferred tax asset ? 52,230 Liabilities Accounts payable Provision for maintenance Provision for employee benefits Subscription received in advance Deferred tax liability 812,000 171,000 117,000 74,000 ? 726,000 128,000 85,000 53,000 0 Additional Information: Subscription revenue is tax assessable when it is received in cash Government award income is not tax assessable Doubtful debts are tax deductible when the company actually incurs bad debts/write off For accounting purpose, the equipment is depreciated using the annual straight line method at a rate of: For tax purpose, however, the equipment is depreciated using the annual straight line method at a rate of: Depreciation of buildings is not allowed as tax deductions and goodwill is not tax assessable Employee benefits are tax deductible when they are paid in cash to the employees Rent expense and maintenance expense are tax deductible when paid in cash Entertainment expense is not allowed as tax deduction Assume a tax rate for the financial years ending 30 June 2019 and 2020 to be: 20% 25% 30% Calculate deferred tax asset and deferred tax liability balances as at 30th June 2020. Prepare the deferred tax journal entries for the year ended 30th June 2020. Journal entry: Dr Cr
