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
Other expenses.
194,100
TOTAL. 813,800 813,800
200
Additional information
1. For tax purposes, depreciation on machinery is $14,000 and for vehicles $300, for the year ended 30 June 2020. 2. 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. 3. Simpson Ltd has accrued annual leave entitlements of $1,800 in calculating net profit for the year ended 30 June 2020. 4. Service warranty expense is only deductible as a tax deduction when claimed by customers. 5. 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. 6. The tax rate is 30% and taxable income is $79,500. Required:
1. Prepare a balance sheet at 30 June 2020 (follow format in textbook on page 181 9thedition, showing one year only). 2. Discuss whether you think the deferred tax assets and liabilities are assets and liabilities in relation to the definitions contained in the conceptual framework (reference your written work to support your arguments). Maximum 300 words.
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
TOTAL. 813,800 813,800 | 200 |
|
Additional information
Required:
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