Reference no: EM132440596

Problem: Newport Ltd reported a Profit before Income Tax of $370,000 for the financial year ended 30 June 2019.

Additional Information

1) On 30 June 2016, Newport Ltd purchased a machine at a cost of $700,000. For accounting purposes, the machine is depreciated on a straight-line basis over 7 years, with zero residual value. For tax purposes the machine is depreciated 10% on cost per annum.

2) On 30 June 2018, the balance of Accounts Receivable was $450,000, and the Provision for Doubtful Debts was $40,000. During the financial year ended 30 June 2019, bad and doubtful debts of $160,000 were provided for, and bad debts of $170,000 were written off. On 30 June 2019, the balance of Accounts Receivable was $480,000. For income tax purposes, bad debts are tax deductible only when written off.

3) On 30 June 2014, Newport Ltd purchased Land at a cost of $550,000. On 30 June 2019, the land was revalued to $740,000.

4) During the financial year ending 30 June 2019, Newport Ltd made a donation to an unregistered charity of $50,000. For income tax purposes, donation expenses to unregistered charities are not tax deductible.

5) The company income tax rate is 30%.

Required:

a) Calculate the balance of the deferred tax assets and deferred tax liabilities at 30 June 2018 and 30 June 2019 for Newport Ltd, in accordance with AASB112: Income Taxes. Show all workings necessary to derive your answer.

b) Calculate taxable income and income tax payable for Newport Ltd for the financial year ending 30 June 2019. Show all workings necessary to derive your answer.

c) Prepare the journal entry for Newport Ltd, to record income tax for the financial year ending 30 June 2019, in accordance with AASB112: Income Taxes. Show all workings necessary to derive your answer.