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Skylar Ltd commenced operations on 1 July 2020. It disclosed a net profit before tax of $90,000 for the year ended 30 June 2021. This

Skylar Ltd commenced operations on 1 July 2020. It disclosed a net profit before tax of $90,000 for the year ended 30 June 2021.

This profit was determined after charging the following items:

Impairment loss- goodwill $4,000

Depreciation of Plant & Equipment $15,000

Depreciation of motor vehicles $5,000

Doubtful Debts $5,000

Increase in Provision for Employee Entitlements $12,000

On 30 June 2021, the accounting and taxation records disclosed the following:

Carrying Amount Tax Base

ASSETS

Plant & Equipment

Accumulated Dep'n:

Motor Vehicles

Accumulated Dep'n:

Cash

Accounts-Receivable (Net)

LIABILITIES

Accounts-Payable

Prov'n for Employee Entitlements

NET ASSETS

60,000

-15,000

30,000

-5,000

45,000

25,000

20,000

85,000

175,000

50,000

42,000

92,000

83,000

60,000

-20,000

30,000

-7,500

40,000

22,500

20,000

90,000

172,500

50,000

30,000

80,000

92,500

Additional information:

The plant and equipment, which cost 60,000 was purchased on 1 July 2020 and is being depreciated at 25% for accounting purposes and at 33-1/3% for tax purpose.

The doubtful debts are not allowed for tax purposes.

There were no employee entitlements taken during the 2021 financial year.

The motor vehicle, which was purchased on 1 July 2020 and cost $30,000 is depreciated over 6 years for accounting purposes and over 4 years for tax purposes. Assume straight line depreciation with NIL salvage value.

Impairment loss for goodwill is not allowable as a tax deduction.

Required tasks (Use Excel spreadsheet to display your answer):

  1. Do statement of taxable income for the year ended 30 June 2021.
  2. Calculate Deductible temporary differences
  3. Calculate Taxable temporary differences
  4. (Do journal entries for income tax expense in accordance with AASB112. (The rate of company tax is 30%)

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