The accounting profit before tax for the year ended 30 June 2016 for Brad Ltd amounted to $30 000 and included:

Depreciation equipment (25%)

$ 25 000

Rent revenue

18 000

Royalty revenue (non-taxable)

4 000

Doubtful debts expense

5 000

Entertainment expense (non-deductible)

3 000

Annual leave expense

2 000

Insurance Expense

8 000

The draft statement of financial position at 30 June 2016 contained the following assets and liabilities.

2015

2016

Assets

Cash

$9 500

$11 500

Prepaid Insurance

6 000

4 000

Receivables

14 000

12 000

Allowance for doubtful debts

(8 000)

(7 000)

Inventories

22 000

25 000

Rent receivable

6 000

7 500

Equipment

100 000

100 000

Accumulated depreciation equipment

(25 000)

(50 000)

Deferred tax asset

3 000

?

127 500

103 000

Liabilities

Accounts payable

18 000

12 400

Provision for annual leave

4 000

5 000

Deferred tax liability

7 000

?

29 000

19 400

Additional information

(a) The company can claim a tax deduction of $35 000 (35%) for depreciation on equipment. The equipment is two years old and straight line depreciation is used.

(b) The company tax rate is 30%.

(c) The company has not paid any tax this year.

Required

1.Prepare the current tax worksheet and the journal entry to recognize the current tax as at 30 June 2016.

2.Prepare any necessary journal entries to adjust the deferred tax accounts at 30 June 2016. The use of the deferred tax worksheet is optional.

Brad Ltd

Deferred Tax Worksheet

as at 30 June 2016

Carrying Amount

AB

Deductible Amount

Tax

Base

TB

Taxable Temporary Differences

DTL

Deductible Temporary Differences DTA

$

$

$

$

$

RelevantAssets

RelevantLiabilities

-

Temporary differences

Deferred tax liability

Deferred tax asset

Beginning balances

Movement during year

Adjustment