Calculate the current tax liability for the year ending

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Reference no: EM131457504

Financial Accounting Theory and Practice Assignment

Module - Accounting for Income Taxes

Question -

As at 1st July 2016 Moorings Ltd had the following opening account balances:

Deferred Tax Asset	$36 000Cr
Deferred Tax Liability	$25 000Dr

During the financial year ending 30 June 2017, the following tax deductions were allowed:

Tax depreciation - Equipment	$16 000
Bad debts written off	$4 000
Long service leave paid	$5 000

Moorings Ltd recorded a profit before tax of $160 000 that included the following items:

Depreciation - Equipment $14 000

Long service leave expense $8 000

Doubtful debts expense $6 000

Goodwill impairment $4 000

Depreciation rates are higher for taxation than accounting purposes. The company's income tax rate is 30%.

Required:

a) Calculate the current tax liability for the year ending 30 June 2017.

b) Calculate how much Deferred Tax Liability and Deferred Tax Asset will increase or decrease for the year ending 30 June 2017 due to the temporary differences. Show all workings.

c) Prepare all journal entries to account for income tax. Assume all recognition criteria are satisfied. Ensure your journal is in the correct format, with column headings and narrations.

d) Prepare T-accounts for Deferred Tax Liability and Deferred Tax Asset at 30 June 2017.

Reference no: EM131457504

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