Reference no: EM132871810
Question - Paul Ltd was established on 1 July 2019 with share capital totalling $132,000. One year later at 30 June 2020, the trial balance of the company was as follows:
Cash $24,000
Accounts Receivable $37,500
Allowance for Doubtful Debts $200
Interest receivable $100
Inventory $20,000
Prepaid Insurance $300
Machinery at cost $79,000
Accumulated depreciation for Machinery $5,900
Vehicles at cost $11,000
Accumulated depreciation for Vehicles $100
Goodwill $45,000
Accumulated impairment loss $300
Investments $25,000
Accounts payable $15,000
Rent payable $6,000
Provision for annual leave $1,800
Provision for services warranties $600
Share capital $132,000
Sales revenue $650,000
Interest revenue $500
Dividend revenue $300
Exempt income $400
Capital profit on sale of land $700
Cost of sales $175,000
Depreciation $6,000
Goodwill impairment loss $300
Salaries and wages $120,000
Annual leave $1,800
Rent $72,000
Insurance $1,200
Entertainment $400
Fines and penalties $100
Fringe benefits tax $200
Warranty expense $600
Doubtful debts $200
Other expenses $194,100
Total $813,800
Additional information:
1. For tax purposes, depreciation on machinery is $14,000 and for vehicles $300, for the year ended 30 June 2020.
2. Doubtful debts, annual leave and service warranties are expensed in the year ending 30 June 2020 but are not tax deductible for tax purposes until paid.
3. Paul Ltd has accrued annual leave entitlements of $1,800 in calculating net profit for the year ended 30 June 2020.
4. Service warranty expense is only deductible as a tax deduction when claimed by customers.
5. The company accrues doubtful debts expense as soon as it appears on a customer's account as uncollectible. However, the bad debt is not allowable as a tax deduction until all avenues to collect the account have been exhausted.
6. The tax rate is 30% and taxable income is $79,500.
Required -
1. How to calculate deferred tax worksheet.
2. Complete the general journal entry to account for income tax.
3. How to do a statement of comprehensive income for the year ended 30 June 2020.
4. How to do a balance sheet at 30 June 2020.
5. Discuss whether you think the deferred tax assets and liabilities are assets and liabilities in relation to the definitions contained in the conceptual framework.