Question
Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal reports for the second year of operations: (Note:
Western Sydney Ltd commenced operations on 1 July 2018. The following has been extracted from their internal reports for the second year of operations: (Note: data for the first year of operations is available from Week 3 Lecture Example) Income Statement (Extract) for the year ended 30 June 2020 $ $ Gross profit .............................................................................................. 756 000 Expenses Administration expenses ....................................................................... 57 000 Doubtful debts expense . 20 000 Salaries expense......................................................................... 195 000 Interest .................................................................................................. 13 000 Long-service leave ................................................................................ 28 000 Warranty expense ................................................................................. 41 000 Depreciation expense plant ............................................................... 80 000 Insurance expense ............................................................................... 30 000 464 000 Accounting profit before income tax expense 292 000 Assets and liabilities as disclosed in the balance sheet as at 30 June 2020 were: Assets Cash ..................................................................................................... 26 000 Inventory ............................................................................................... 105 000 Accounts Receivable (net of $5,000 D. Debt Allowance) ..................... 130 000 Prepaid insurance ................................................................................. 3 000 Plant cost ........................................................................................... 400 000 Accum Depn Plant ............................................................................. 160 000 240 000 Liabilities Accounts Payable .................................................................................. 74 500 Provision for warranty ............................................................................ 45 000 Provision for long-service leave ............................................................. 2 000 Loan Payable ......................................................................................... 175 000 Additional information: Plant is depreciated straight-line with no residual value over five years for accounting purposes and four years for taxation purposes. The administration expense includes payment of $12,000 for goodwill impairment. Bad debts written off during the year were $21,000. Insurance, warranty and long-service leave are deductible for tax purposes when paid. The tax rate is 30% Required: (a) Calculate taxable income and its current tax consequences. (b) Complete the deferred tax worksheet (use the template attached here: (ACCT3007 Week 3 Homework Part (b) Template.docx) (c) Prepare the journal entries for both the current and deferred tax consequences and for disclosure of deferred tax in the Balance Sheet. (Narrations are required
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