Bravo Berhad began operation in 2019 and has provided the following information.

1. Profit before tax for 2019 is RM100,000

2. The tax rate is 40%
3. Difference between the 2019 income statement and tax return are as follows:
a. Warranty expense accrued for financial reporting purposes amounts to
RM5,000. Warranty deductions for tax return is RM2,000.
b. Gross profit on construction contracts using completion for books
amounts to RM92,000. Gross profit on construction contracts using
completion for books amounts to RM62,000.
c. Depreciation of PPE for financial reporting is RM60,000. Capital
allowance (tax depreciation) of these assets is RM80,000.
d. A RM3,500 fine paid for violation of pollution law was deducted in
computing profit before tax.
e. Interest revenue earned on an investment in tax-exempt Malaysian
bonds amount to RM1,400.

Required:

a) Compute taxable income

b) Compute the deferred taxation at December 31, 2019.
c) Prepare the journal entry to record income tax expense, deferred taxation and
in income tax payable for 2019
d) Draft the income tax expense section in the income statement, beginning with
“Profit before tax’

Answer:
RM RM

Profit before tax 100,000

Income tax expense

Current 22,040

Deferred 18,800 40,840

Profit after tax 59,160