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 ...... 760 000 Expenses Administration expenses 58 000 Doubtful debts expense 21 000 Salaries expense. 195 000 Interest ......... 13 000 Long-service leave 28 000 Warranty expense 41 000 Depreciation expense - plant. 79 000 Insurance expense.... 30 000 465 000 Accounting profit before income tax expense 295 000 1 Student Name:......... Student ID:..... Assets and liabilities as disclosed in the balance sheet as at 30 June 2020 were: Assets Cash. 25 000 Inventory ...... 103 000 Accounts Receivable (net of $5,000 D. Debt Allowance) 115 000 Prepaid insurance 2 000 Plant - cost. 400 000 Accum Depn - Plant 160 000 240 000 Liabilities Liabilities Accounts Payable. 75 000 Provision for warranty 45 000 Provision for long-service leave 2 000 Loan Payable. 180 000 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% (b) Complete the deferred tax worksheet (use the following template). 2. Determine future tax consequences for year end 30 June 2020 Carrying Tax Base Deductible Taxable Income 30 June 2020 Amount Temporary Temporary Tax Differences Differences Expense $ $ $ $ $ Assets Income Tax Payable $ Liabilities Temporary differences at period end Less: Prior period amounts Movement for the period Tax affected Tax on taxable income Income tax adjustments required (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) 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 ...... 760 000 Expenses Administration expenses 58 000 Doubtful debts expense 21 000 Salaries expense. 195 000 Interest ......... 13 000 Long-service leave 28 000 Warranty expense 41 000 Depreciation expense - plant. 79 000 Insurance expense.... 30 000 465 000 Accounting profit before income tax expense 295 000 1 Student Name:......... Student ID:..... Assets and liabilities as disclosed in the balance sheet as at 30 June 2020 were: Assets Cash. 25 000 Inventory ...... 103 000 Accounts Receivable (net of $5,000 D. Debt Allowance) 115 000 Prepaid insurance 2 000 Plant - cost. 400 000 Accum Depn - Plant 160 000 240 000 Liabilities Liabilities Accounts Payable. 75 000 Provision for warranty 45 000 Provision for long-service leave 2 000 Loan Payable. 180 000 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% (b) Complete the deferred tax worksheet (use the following template). 2. Determine future tax consequences for year end 30 June 2020 Carrying Tax Base Deductible Taxable Income 30 June 2020 Amount Temporary Temporary Tax Differences Differences Expense $ $ $ $ $ Assets Income Tax Payable $ Liabilities Temporary differences at period end Less: Prior period amounts Movement for the period Tax affected Tax on taxable income Income tax adjustments required (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)
