Stuart Ltd commences its operations on 1 July 2019. One year after the commencement of its operations (30 June 2020) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. The statements are prepared before considering taxation. The following information is available. Stuart Ltd Statement of Comprehensive Income for the year ended 301une 2020 $ 33 Sales revenue 10,250,000 Cost of Goods Sold 4,650,000 Gross Prot 5,600,000 Expenses: Salaries and wages 1,050,000 Selling expense 35,000 Administrative expenses 700,000 Provision for doubtful debts 175,000 Warranty expenses 210,000 Long service leave 350,000 Depreciation expense 2 Plant 560,000 Insurance 230,000 3 ,3 10,000 Accounting prot for the year 2,290,000 Stuart Ltd Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2020 $ Assets Cash and cash equivalent 160,000 Accounts receivables (net) 525,000 Inventory 700,000 Prepaid insurance 70,000 Plant- cost 2,800,000 Less- Accumulated depreciation 560,000 2,240,000 Land 3,150,000 Total assets 6,845,000 Liabilities Accounts payables 560,000 Provision for warranty expenses 120,000 Provision for long service leave 170,000 Bank loan payable 1,400,000 Total liabilities 2,250,000 Net assets 4,595,000Other information: All selling, administration, and salaries and wages expenses incurred have been paid as at yearend. Stuart Ltd has some land which cost $2,300,000 and which has been revalued to its fair value of $3,150,000. Insurance was initially prepaid t0 the amount of $300,000. At the yearend, the unused component ofthe prepaid insurance amounted to $70,000. Actual amounts paid are allowed as a tax deduction. The amount of $180,000 long service leave expense has been paid. The plant is depreciated over 5 years for accounting purposes, but over 4 yea rs for taxation purposes. Warranty expenses were accrued $210,000 and, at the yearend actual payments of $90,000 had been made (leaving of accrued balance of$120,000). Deductions for tax purposes are only available when the amounts are paid and not as they accrued. Amounts received from sales, including those on credit terms, are taxed at the time of the sale is made. The tax rate is 30 per cent. Stuart Ltd Taxation Worksheet as at 30 June 2020 Item Carrying amount Tax Base Deductable Temporary Temporary Difference Difference $ $ Taxable Tax Expense $ Revaluation Surplus $ Tax Payable $ Assets Cash Accounts receivables (net) Prepaid insurance Inventory Plant 7 net Land Liabilities Accounts payables Provision for long service leave Provision for warranty Bank loan payable Net assets Temporary difference for year Loss carried forward Movement for the period Tax effected at 30% Tax on taxable income Income tax adjustment
