Question
Simpson Ltd was established on 1 July 2019 with share capital totalling $132,000. One year later at 30 June 2020 the trial balance of the
Simpson Ltd was established on 1 July 2019 with share capital totalling $132,000.
One year later at 30 June 2020 the trial balance of the company was as follows:
Account | Debit | Credit |
Cash | 24,000 |
|
Accounts receivable | 37,500 |
|
Allowance for doubtful debts |
| 200 |
Interest receivable | 100 |
|
Inventory | 20,000 |
|
Prepaid insurance | 300 |
|
Machinery (at cost) | 79,000 |
|
Accumulated depreciation - Machinery |
| 5,900 |
Vehicles | 11,000 |
|
Accumulated depreciation - Vehicles |
| 100 |
Goodwill | 45,000 |
|
Accumulated impairment loss |
| 300 |
Investments | 25,000 |
|
Accounts payable |
| 15,000 |
Rent payable |
| 6,000 |
Provision for annual leave |
| 1,800 |
Provision for services warranties |
| 600 |
Share capital |
| 132,000 |
Sales revenue |
| 650,000 |
Interest revenue |
| 500 |
Dividend revenue |
| 300 |
Exempt income |
| 400 |
Capital profit on sale of land |
| 700 |
Cost of sales | 175,000 |
|
Depreciation | 6,000 |
|
Goodwill impairment loss | 300 |
|
Salaries & wages | 120,000 |
|
Annual leave | 1,800 |
|
Rent | 72,000 |
|
Insurance | 1,200 |
|
Entertainment | 400 |
|
Fines and penalties | 100 |
|
Fringe benefits tax | 200 |
|
Warranty expense | 600 |
|
Doubtful debts | 200 |
|
Other expenses | 194,100 |
|
TOTAL | 813,800 | 813,800 |
Additional information:
- For tax purposes, depreciation on machinery is $14,000 and for vehicles $300, for the year ended 30 June 2020.
- Doubtful debts, annual leave and service warranties are expensed in the year ending 30 June 2020 but are not tax deductible for tax purposes until paid.
- Simpson Ltd has accrued annual leave entitlements of $1,800 in calculating net profit for the year ended 30 June 2020.
- Service warranty expense is only deductible as a tax deduction when claimed by customers.
- The company accrues doubtful debts expense as soon as it appears on a customers account as uncollectible. However, the bad debt is not allowable as a tax deduction until all avenues to collect the account have been exhausted.
- The tax rate is 30% and taxable income is $79,500.
Required:
- Complete a deferred tax worksheet.
- Complete the general journal entry to account for income tax.
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