The profit before tax, as reported in the statement of profit and loss for DXB Ltd for the year ended 30 June 2020, amounted to $300 000, including the following revenue and expense items.

Sales revenue $1 490 000 Interest revenue 100 000 Government grant (non-taxable) 45 000 Cost of sales 900 000 Bad debts expense 40 000 Depreciation expense Equipment 80 000 Research and development expense 77 000 Long service leave expense 75 000

The statement of profit and loss for DXB Ltd for the year ended 30 June 2020 also included a gain on sale of equipment of $40 000. According to AASB 116/IAS 16, this gain is not classified as revenue, but it is nevertheless part of the accounting profit before tax for the year. The draft statements of financial position of DXB Ltd at 30 June 2019 and 30 June 2020 showed the following assets and liabilities.

2019

2020

Assets

Cash

$ 180 000

$ 180 000

Inventories

200 000

400 000

Accounts receivable

220 000

300 000

Allowance for doubtful debts

(20 000)

(40 000)

Interest receivable

100 000

80 000

Equipment

120 000

Accumulated depreciation Equipment

(60 000)

Goodwill

66 000

66 000

Deferred tax asset

155 000

?

Liabilities

Accounts payable

200 000

120 000

Revenue received in advance

33 000

Provision for long service leave

120 000

100 000

Deferred tax liability

96 000

?

Additional information

• In the year ended 30 June 2019, DXB Ltd had a tax loss of $55 000 that it carried over in the deferred tax asset.
• Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. All other general taxation rules apply.
• The movement in the equipment account is caused by the sale of the equipment on 1 March 2020 for which a gain on sale of $40 000 was recognised as part of the profit before tax (see above). DXB Ltd had purchased the equipment on 1 July 2018 (with an estimated useful life of 2 years and no residual value) and for taxation purposes it claimed its full cost as a deduction at 30 June 2019.
• All research and development expenses were paid in cash during the year ended 30 June 2020.
• Assume the company tax rate is 30%.

Required

1. Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2020.

ANSWER

DXB LTD

Current tax worksheet

for year ended 30 June 2020