Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The draft statement of financial position at 30 June 2021 for Red Ltd contained the following assets and liabilities: 2021 2020 $ $ Assets Cash

The draft statement of financial position at 30 June 2021 for Red Ltd contained the following assets and liabilities:

 

 

2021

2020

 

          $

         $

Assets

 

 

Cash

1,000

7,500

Accounts receivable

84,000

76,800

Allowance for doubtful debts

(5,000)

(3,200)

Inventory

65,100

58,300

Interest receivable

2,000

-

Prepaid rent

3,800

2,400

Plant – cost

220,000

220,000

Less: accumulated depreciation

(99,000)

(66,000)

Goodwill

6,000

6,000

Deferred tax asset

?

30,860

Total assets

 

332,660

 

 

 

Liabilities

 

 

Accounts payable

70,200

73,600

Provision for employee benefits

62,000

61,000

Loan payable

100,000

100,000

Deferred tax liability

?

2,220

Total liabilities

 

236,820

 

Additional information:

  1. The plant’s tax depreciation rate is 10% and accounting rate is 15% per year. Both rates use the straight-line method. The plant was acquired 3 years ago and there have been no purchases or sale of plant since.
     
  2. The deferred tax asset (DTA) balance at 30 June 2020 comprised:
    DTAs relating to temporary differences: $25,860
    DTAs relating to carried forward tax losses: $5,000
    During the year ended 30 June 2021, a taxable income was calculated and the carried forward tax losses were claimed in full. The journal entry for this adjustment was already recorded.
     
  3. The tax rate is 30%.

 

 

Required: 

  1. Calculate the deferred tax assets and deferred tax liabilities for the year ended 30 June 2021 using a worksheet with the following headings: 

Account

Carrying Amount

Future Deductible Amount

Tax Base

Taxable Temporary Differences

Deductible Temporary Differences

 

Show all accounts.

  1. Prepare the necessary journal entries to record the deferred tax asset and deferred tax liability adjustment as at 30 June 2021.                                               
  1. With reference to the relevant accounting standard, explain whether all temporary differences that exist at balance date will give rise to deferred tax assets or deferred tax liabilities?

Step by Step Solution

3.45 Rating (155 Votes )

There are 3 Steps involved in it

Step: 1

Account Carrying Future Deductible Tax Base Taxable Temporary Deductible Temporary Amount Amount Differences Differences Deferred Tax Assets 25860 258... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting and Reporting

Authors: Barry Elliott, Jamie Elliott

14th Edition

978-0273744535, 273744445, 273744534, 978-0273744443

More Books

Students also viewed these Accounting questions

Question

What is meant by incremental costing?

Answered: 1 week ago