Answer To: you mustFIRSTenter your student ID on the excel spreadsheet ( CELL B2) prior to working on the...
Abr Writing answered on Sep 18 2020
Background information
Student ID
input student ID here 217631534 PART A
The profit before tax, as reported in the statement of comprehensive income of Arkibath Ltd (an Australian building services company) for the year ended 30 June 2018
amounted to: $3,900,000
including the following revenue and expense items:
Rent Revenue $121,000
Government grant received $219,000
Doubtful debts expense $24,000
Depreciation (Plant) $158,400
Depreciation (Buildings) $39,000
Long-service leave expense $109,000
Annual leave expense $73,000
Office supplies expense $36,000
Entertainment expense $60,900
The draft statements of financial position of the company at 30 June 2018 and 2017 showed the following assets and liabilities:
2018 ($) 2017 ($)
Assets
Cash $255,000 $280,000
Inventory $548,000 $499,000
Accounts Receivable $1,584,000 $1,511,000
Allowance for doubtful debts -$126,000 -$117,000
Office Supplies $68,000 $63,000
Plant $1,584,000 $1,584,000
Accumulated depreciation - Plant -$633,600 -$475,200
Buildings $975,000 $975,000
Accumulated depreciation - Buildings -$390,000 -$351,000
Land $609,000 $609,000
Goodwill (net) $243,000 $243,000
Deferred Tax Asset ? $35,820
Liabilities
Accounts Payable $926,000 $828,000
Long service leave payable $195,000 $146,000
Annual leave payable $134,000 $97,000
Rent received in advance $85,000 $60,000
Deferred Tax Liability ? $0
Additional Information:
a) Rent revenue is tax assessable when it is received in cash
b) Government grant is not tax assessable
c) Doubtful debts are tax deductible when the company actually incurs bad debts/write off
d) For accounting purpose, plant is depreciated using the straight line method at a rate of: 10% per annum
For tax purpose, however, the plant is depreciated on: 15% per annum
e) Depreciation of buildings and entertainment costs are not allowed as tax deductions
f) Employee entitlements such as long service and annual leave are tax deductible when they are paid in cash to the employees
g) Office supplies are tax deductible when it is paid in cash
h) Entertainment expenses are not allowed as tax deductions
i) Aggregated turnover for the year ended 30 June 2017 and 2018 is in excess of $25million and it is expected that turnover will exceed $50million in the year ended 30 June 2019
Required:
1) Calculate the taxable income/tax loss and the current tax liability (if any) for the financial year ended 30th June 2018. Prepare a journal entry to recognise the current tax liability/tax loss.
2) Calculate deferred tax asset and deferred tax liability balances as at 30th June 2018. Prepare the deferred tax journal entries for the year ended 30th June 2018. Note that you are NOT required to prepare journals to offset the deferred tax asset and deferred tax liability balances.
Show your calculation using deferred tax...