Reference no: EM133179463
Question - Winter Ltd commenced operation on 1 July 2020 and prepared its first financial statements for the year ended 30 June 2021. The following information has been provided:
Profit before tax for the year ended 30 June 2021 was calculated as follows:
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Gross Profit
|
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$1,480,000
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Less: Expenses:
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|
|
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Long Service Leave
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10,000
|
|
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Depreciation Plant and Equipment
|
135,000
|
|
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Salaries and Wages
|
99,000
|
|
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Warranty Claims
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36,000
|
|
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Amortisation of Research and Development
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180,000
|
|
|
Insurance
|
18,000
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|
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Doubtful Debts Expense
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20,000
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|
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Other Expenses
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370,000
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|
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Total expenses
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868,000
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Profit before tax
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612,000
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Balance Sheet items as at 30 June 2021:
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Details
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$
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$
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Assets:
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|
|
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Cash
|
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4,000
|
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Inventories
|
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144,000
|
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Accounts Receivable
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162,000
|
|
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Less Allowance for Doubtful Debts
|
20000
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142,000
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Prepaid Insurance
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7,200
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Plant and Equipment
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540,000
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|
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Less Accumulated Depreciation
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135,000
|
405,000
|
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Research and Development
|
600,000
|
|
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Less Accumulated Amortisation
|
180,000
|
420,000
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Goodwill (net)
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50,000
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Liabilities:
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|
|
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Accounts Payable
|
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290,000
|
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Provision for Warranty Claims
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|
27,000
|
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Provision for Long Service Leave
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|
10,000
|
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Loan Payable
|
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577,200
|
Additional Information:
1. Tax deductions for warranty expenses are only available when claims are paid.
2. Insurance expense is an allowable tax deduction when paid in cash.
3. The company can claim a tax deduction of 125% on research and development expenditure paid.
4. There are no accrued salaries and wages at 30 June 2021.
5. For accounting purposes, Winter Ltd. depreciates the cost of Plant and Machinery over four years. Plant and Equipment is depreciated at 20% per annum for tax purposes.
6. Long Service Leave can only be claimed as a tax deduction when paid to employees.
7. Doubtful debts expense cannot be claimed as a tax deduction until a bad debt is written off.
8. Include in other expenses is an amount of $5000 for goodwill impairment write-off.
9. The tax rate for the year ended 30 June 2021 is 30%.
Required - Using the methods prescribed by AASB 112 i.e., the 'balance sheet' approach.
1. Calculate the taxable income of Winter Ltd for the year ended 30 June 2021.
2. Prepare the Journal entry to record the current tax liability for 2021.
3. Prepare a deferred tax worksheet for the 2021 year.
4. Write the journal entries to record any deferred tax assets and liabilities at 30 June 2021.