Thor Ltd’s profit before tax for the year ended 30 June 2020 was $240,200. Included in this profit are the following items of income and expense:

Amortisation of development costs	$16,000
Carrying amount of equipment sold	22,000
Depreciation – building (5%)	9,500
Depreciation – plant (15%)	13,500
Doubtful debts expense	4,000
Employee benefits expense	12,000
Entertainment expense	7,200
Fines and penalties	5,400
Insurance expense	6,200
A process on sale if the equipment	19,000
Rent revenue	32,000
Royalty revenue (exempt income)	4,400
Warranty expense	8,500
Unearned revenue	8,700

 

 

At 30 June, the company’s draft statements of financial position showed the following balances:

	2020	2021
Assets
Cash	$27,400	$14,600
Accounts Receivables	22,000	23,000
Allowance for doubtful debts	(4,000)	(3,500)
Inventories	27,000	29,500
Prepaid Insurance	14,000	12,300
Rent Receivable	22,000	25,000
Development Cost	80,000	-
Accumulated amortisation	(16,000)	-
Plant	90,000	130,000
Accumulated depreciation	(54,000)	(58,500)
Building	190,000	190,000
Accumulated depreciation	(38,000)	(28,500)
Deferred tax asset	?	18,000
Goodwill	11,000	11,000

 

	2020	2021
Liabilities
Accounts Payable	$33,000	$31,200
Current tax liabilities	?	7,600
Deferred tax liability	?	17,040
Provision for employee benefits	22,500	16,000
Provision for warranties	4,500	8,000
Loan payable	220,000	190,000
Revenue received in advance.	8,700	-

 

1. The tax rate is 30%.
2. A tax deduction for development costs on 125% of the amount spent during the year is available for tax purposes. The profit reflects the amount of development costs amortised in the current period.
3. A tax deduction of $18,000 (20%) can be claimed on the plant.
4. The plant sold on 1 July 2019 cost $40,000 when it was purchased 3 years before the date of sale.
5. Deductions are only available for annual leave when amounts are paid and not as they are accrued.
6. Actual amounts paid for insurance are allowed as a tax deduction.
7. No deduction is allowed for taxation purposes in relation to entertainment, fines, and penalties.
8. Rent revenue is taxable when amounts are received.
9. Depreciation of buildings is not allowed as a tax deduction.
10. The deferred tax asset (DTA) balance at 30 June 2019 comprised:
    i) DTAs relating to temporary differences: $8,250
    ii) DTAs relating to carried forward tax losses: $9,750

    No journal entries related to deferred tax have been recorded for the year ended 2020. Assume the tax balances at 30 June 2019 are correct.

     

    Required:

    1. Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2020 (show all working).
    2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2020.
       Include all accounts and net balances where appropriate.
    3. Prepare the journal entries to recognise the current tax liability, deferred tax assets, and liabilities at 30 June 2020.