Windy Ltd has requested that you prepare the tax-effect accounting information for the year ended 30 June 2021. The following has been extracted from their internal reports: -Accounting profit before tax for the year................................................... $855,000 -Expenses brought to account included: Depreciation – plant................................................................................... $93,000 Impairment loss on goodwill....................................................................... $13,500 Long service leave...................................................................................... $13,000 - Accumulated depreciation on plant for tax purposes was $130,000 on 30 June 2020 and $270,000 on 30 June 2021. There were no additions or disposals of plant during the year. - Bad debts of $14,700 were written off during the year against the Allowance for Doubtful Debts. - On 1 January 2021 the company income tax rate was increased from 30% to 35%, effective for the 2020/2021 tax year and onwards. The deferred tax opening balances on 1 July 2020 were: Deferred Tax Asset (based on DTD of $ 85,000)......................... $ 25,500 Deferred Tax Liability (based on TTD of $ 65,000)...................... $ 19,500 (DTD: deductible temporary differences; TTD: taxable temporary differences) - Reporting date is 30 June. Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2021 were: Assets Accounts Receivable............................................................... $245,000 Less: Allowance for Doubtful Debts [2020 $11,000]................ 15,000 $230,000 Inventory...................................................................................................... 286,000 Plant – cost............................................................................... $750,000 Less: Accumulated Depreciation – Plant.................................... 175,000 575,000 Liabilities Accounts Payable.......................................................................................... $202,000 Provision for long-service leave................... [2020 $57,000]....................... 60,000 Required: (i) Provide the journal entry to adjust the opening deferred tax accounts due to the tax rate change. (Narrations are required) (ii) Show the calculation of income tax expense and income taxable payable.
Windy Ltd has requested that you prepare the tax-effect accounting information for the year ended 30 June 2021. The following has been extracted from their internal reports:
-Accounting profit before tax for the year................................................... $855,000
-Expenses brought to account included:
Impairment loss on
Long service leave...................................................................................... $13,000
-
-
- On 1 January 2021 the company income tax rate was increased from 30% to 35%, effective for the 2020/2021 tax year and onwards. The
(DTD: deductible temporary differences; TTD: taxable temporary differences)
- Reporting date is 30 June.
Relevant assets and liabilities as disclosed in the Balance Sheet as at 30 June 2021 were:
Assets
Accounts Receivable............................................................... $245,000
Less: Allowance for Doubtful Debts [2020 $11,000]................ 15,000 $230,000
Inventory...................................................................................................... 286,000
Plant – cost............................................................................... $750,000
Less: Accumulated Depreciation – Plant.................................... 175,000 575,000
Liabilities
Accounts Payable.......................................................................................... $202,000
Provision for long-service leave................... [2020 $57,000]....................... 60,000
Required:
(i) Provide the
(ii) Show the calculation of income tax expense and income taxable payable.
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Assume that the Cindy Ltd has a depreciateable plant. The plant was acquired on 1 January 2019 at a cost of $360,000. For accounting purposes its useful life is estimated to be 10 years after which time it is expected to have $50,000 residual value. For tax purposes it is to be fully written off over 8 years at 12.5% p.a. of its original cost. Part-year
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