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The Following information was extracted from the records of Orchid Ltd. for the year ended 30 June 2014: Assets Cash Accounts Receivable $ 150,000
The Following information was extracted from the records of Orchid Ltd. for the year ended 30 June 2014: Assets Cash Accounts Receivable $ 150,000 $25,000 Allowance for doubtful debts (2,000) 23,000 Inventory 25,000 Land Prepaid Insurance Building Accumulated Depreciation - Building Furniture 6,000 120,000 600,000 (140,000) 460,000 150,000 Accumulated Depreciation - Furniture Machines ( 30,000) 120,000 100,000 Accumulated Depreciation - Machines Deferred Tax Assets(beginning balance) Goodwill (25,000) 75,000 3,000 80,000 Liabilities Accounts Payable Interest Payable Provision for annual leave Unearned Service Revenue Deferred Tax Liabilities (beginning balance) Bonds Payable 35,000 1,000 23,000 12,000 3,000 150,000 Additional Information (a) Sales revenue is taxable for the revenue earned in the period. (b) The bad debt deduction for tax purpose when bad debts is actually written off. (c) The accumulated depreciation - Machine for tax purposes at 30 June 2014 was $50,000 (d) Depreciation of Furniture is not deductible for tax purposes. (e) The accumulated depreciation - Building for tax purposes at 30 June 2014 was $250,000 (f) Interest deduction for tax purpose when interest is actually paid. (g) Annual leave deduction for tax purpose when the annual leave is actually paid. (h) The tax rate is 30% Required: (1) Prepare a deferred tax worksheet to identify the temporary differences arising in respect of the assets and liabilities in the statement of financial position, and to calculate the balance of the deferred tax liability and deferred tax asset accounts at 30 June 2014. (2) Prepare the journal entries to record the Income Tax expense related to current tax and deferred tax. (assumed the Income Tax Payable for the current period is $250,000).
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