The profit before tax, as reported in the statement of profit and loss for Aileen Ltd for the year ended 30 June 2020, amounted to $216,000, including the following revenue and expense items:

Revenues

Sales revenue Interest revenue Government grant

Expenses

Cost of goods sold Bad debts expense Depreciation expense equipment Depreciation expense plant Amortisation expense development costs Wages expense

$600,000 70,000 40,000

300,000 10,000 6,000 25,000 33,000 120,000

The draft statement of financial position of Aileen Ltd at 30 June 2020 and the statement from last year showed the following assets and liabilities:

• A tax deduction for development costs of 110% of the $99,000 spent during the year is available.

• All revenues recorded in the rent received in advance account belong to the next financial period.

• All movements of deferred tax accounts during the year are not yet recongised.

• The company tax rate applicable is 30%.

  REQUIRED:

1. (a) Determine the taxable profit for the year ended 30 June 2020. Start from the accounting profit before tax and show the adjustments for differences between taxation and accounting rules. (12 marks)

2. (b) Complete the worksheet on the additional page provided to determine the movements in the deferred tax accounts for the year ended 30 June 2020. (15 marks)

3. (c) Prepare the journal entries to recognise the current tax liability and the final deferred tax adjustments for the year ended 30 June 2020 including the movement during the year due to carry-forward tax loss. Note Aileen Ltd does not set off the deferred tax accounts against each other. (3 marks)

2019 2020 Assets Cash Inventory Accounts receivable Allowance for doubtful debts Interest receivable Equipment -cost Accumulated depreciation - equipment Plant - cost Accumulated depreciation - plant Development costs Accumulated amortisation - development costs Goodwill Deferred tax asset $25,000 100,000 50,000 (5,000) 25,000 30,000 (12,000) 500,000 (50,000) $30,000 150,000 70,000 (9,000) 21,000 30,000 (18,000) 500,000 (75,000) 99,000 (33,000) 15,000 ? 15,000 33,000 Liabilities Accounts payable 60,000 40,000 50,000 Wages payable Rent received in advance Loan payable Deferred tax liability 80,000 30,000 100,000 ? 200,000 18,113 Additional information: In the year ended 30 June 2019, Aileen Ltd had a tax loss of $70,000 that it carried over in the deferred tax asset. In June 2020, the company received an amended assessment for the year ended 30 June 2020 from the ATO, indicating that an amount of $10,000 claimed as a deduction has been disallowed. Aileen Ltd has not yet adjusted its accounts to reflect the amendment. The remaining losses can be used to offset taxable incomes in future periods. 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 depreciation regimes for the financial reports and the company income tax return respectively, are listed below. Equipment Plant 20 yrs 20% 30% 10 yrs Depreciation Regimes Depreciation rate: Accounting Tax Method: Accounting Tax Residual: Straight-line Reducing Balance Zero Straight-line Straight-line Zero 2019 2020 Assets Cash Inventory Accounts receivable Allowance for doubtful debts Interest receivable Equipment -cost Accumulated depreciation - equipment Plant - cost Accumulated depreciation - plant Development costs Accumulated amortisation - development costs Goodwill Deferred tax asset $25,000 100,000 50,000 (5,000) 25,000 30,000 (12,000) 500,000 (50,000) $30,000 150,000 70,000 (9,000) 21,000 30,000 (18,000) 500,000 (75,000) 99,000 (33,000) 15,000 ? 15,000 33,000 Liabilities Accounts payable 60,000 40,000 50,000 Wages payable Rent received in advance Loan payable Deferred tax liability 80,000 30,000 100,000 ? 200,000 18,113 Additional information: In the year ended 30 June 2019, Aileen Ltd had a tax loss of $70,000 that it carried over in the deferred tax asset. In June 2020, the company received an amended assessment for the year ended 30 June 2020 from the ATO, indicating that an amount of $10,000 claimed as a deduction has been disallowed. Aileen Ltd has not yet adjusted its accounts to reflect the amendment. The remaining losses can be used to offset taxable incomes in future periods. 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 depreciation regimes for the financial reports and the company income tax return respectively, are listed below. Equipment Plant 20 yrs 20% 30% 10 yrs Depreciation Regimes Depreciation rate: Accounting Tax Method: Accounting Tax Residual: Straight-line Reducing Balance Zero Straight-line Straight-line Zero