Reed Ltd is a manufacturer of surfboards which commenced operations on 1 July 2018. The Statement of Comprehensive Income and the Statement of Financial Position were compiled on 30 June 2020. The following information was available:

Statement of Comprehensive Income for the year ended 30 June 2020

$ $

Sales 760,000

Less

Cost of Goods Sold 220,000

Administrative expense 80,000

Warranty expense 70,000

Depreciation- machine 48,000

Insurance expense 10,000 428,000

Profit before income tax 332,000

Following information was extracted from the Statement of Financial Position at 30 June 2020:

2019 2020

Prepaid insurance 24,000 36,000

Machine 480,000 480,000

Less: Accumulated depreciation 48,000 96,000

Provision for warranty 34,000 28,000

Other information was available for the year ended 30 June 2020:

1) Sales are recorded for income tax purpose at the time the sales are made.

2) Cost of Goods Sold and administrative expense incurred have been paid. They are allowed as a tax deduction at the year end.

3) Warranty expense was accrued. Deduction for income tax purpose is available only when the amount is paid.

4) The machine was purchased two years ago at a value of $480,000. It is depreciated evenly over its useful life and it has no residual value. The useful life is ten years based on accounting policy, but it is depreciated over eight years according to the taxation rule.

5) Insurance is allowed as a tax deduction when it is paid.

6) Income tax rate is 30%.