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The following are all independent situations. Prepare the journal entries for deferred tax on the creation or reversal of any temporary differences. Explain in each
The following are all independent situations. Prepare the journal entries for deferred tax on the creation or reversal of any temporary differences. Explain in each case the nature of the temporary difference. Assume a tax rate of 30%.
1. The entity has an allowance for doubtful debts of $10 000 at the end of the current year relating to
accounts receivable of $125 000. The prior year balances for these accounts were $8500 and $97 500
respectively. During the current year, debts worth $9250 were written off as uncollectable.
2. The entity sold a vehicle at the end of the current year for $15 000. The vehicle cost $100 000 when purchased 3 years ago, and had a carrying amount of $25 000 when sold. The taxation depreciation rate
for equipment of this type is 33%.
3. The entity has recognised an interest receivable asset with a beginning balance of $17 000 and an
ending balance of $19 500 for the current year. During the year, interest of $127 000 was received in
cash.
4. At the end of the current year, the entity has recognised a liability of $4000 in respect of outstanding
fines for non-compliance with safety legislation. Such fines are not tax-deductible.
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