Answers

a) Calculation for current tax for the year ended 30 June 2023.

Accounting profit before tax 600,000

Add:
Bad debts expense 60 000
Depreciation of plant 50 000
Long-service leave expense 45 000
Annual leave expense 30 000
Office supplies used 15 000
Entertainment cost 18 000
Depreciation of building 8 000 226,000

826,000

Less:

Government grant received 10,000

Depreciation of Plant 75,000 85,000

Taxable Income 741,000

Current Tax Liability

= $741, 000 X 30%

= $ 222, 300

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 b) Prepare the deferred tax worksheet.

Carrying Taxable Deductible Tax Base Taxable Deductible

Amount Amount Amount
Temporary Temporary
difference difference
Assets
Cash 80,000 0 0 80,000
Inventory 170,000 (170,000) 170,000 170,000
Receivables 445,000 0 55,000 500,000 55,000
Office supplies 25,000 (25,000) 18,000 18,000 7,000
Plant 240,000 (240,000) 110,000 110,000 130,000
Building 152,000 152,000 0 0 152,000
Goodwill 70,000 (70,000) 0 0 70,000

Liabilities
Trade payable 290,000 0 0 290,000
Long Service leave 60,000 0 (60,000) 0 60,000
payable
Annual leave payable 40,000 0 (40,000) 0 40,000
Rent received in advance 25,000 (25,000) 0 0 25,000
Total Temporary 359,000 180,000
Difference
Less: Excluded items (152,000)
Net Temporary 207,000 180,000
difference

Deferred Tax Liability 62,100

Deferred Tax Asset 54,000
Less: Beginning Balance 38,000 40,000

Movement for the year 24,100 14,000

adjustment

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 c) Prepare the journal entries arising from the above.

Journal entries

Debit Credit

Income Tax expense 222, 300

Current tax liability 222, 300
(Taxable income)

Income tax expense 24, 100

Deferred tax liability 24,100
(Movement for the year adjustment)

Deferred tax asset 14,000

Income tax expense 14,000
(Movement for the year adjustment)

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