Reference no: EM132985034

Sky Ltd commences operations on 1 July 2019. The entity prepares its first statement of profit or loss and other comprehensive income and its first statement of financial position on 30 June 2020. The statements are prepared before considering taxation. The following information is available.

Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020

Gross profit $ 500,000
Wages expense (200,000)
Annual leave expense (50,000)
Bad debts expense (20,000)
Rent expense (50,000)
Depreciation expense - furniture and fittings (30,000)
Accounting profit before taxes 150,000

Statement of Financial Position as at 30 June 2020

Assets
Cash $ 150,000
Inventories 200,000
Accounts receivable (net) 180,000
Prepaid rent 50,000
Furniture and fittings 150,000
Accumulated depreciation - furniture and fittings (30,000)
Total 700,000

Liabilities
Accounts payable 100,000
Revenue received in advance 50,000
Loan payable 200,000
Provision for annual leave 50,000
Total 400,000

Additional information:

• The company tax rate is assumed to be 30%.
• All salaries have been paid as at year-end and are deductible for tax purposes.
• None of the annual leave has actually been paid. It is not deductible for tax purposes until it is actually paid.
• Rent was paid in advance on 1 July 2019. Actual amounts paid are allowed as a tax deduction.
• Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off.
• The revenue received in advance is included in the taxable income.
• The furniture and fittings are depreciated on a straight-line basis over 5 years for accounting purposes, but over 3 years for taxation purposes. The furniture and fittings are not expected to have any residual value.
• Deferred tax assets and deferred tax liabilities can be offset against each other.

Required:

Problem (a) Calculate the taxable profit for the year ended 30 June 2020.

Problem (b) Prepare journal entry for the current period income taxes on 30 June 2020 in accordance with AASB 112 "Income Taxes".

Problem (c) Calculate deductible temporary differences as at 30 June 2020 in accordance with AASB 112 "Income Taxes". Fill out a partial deferred tax adjustment table below.

Problem (d) Calculate taxable temporary differences as at 30 June 2020 in accordance with AASB 112 "Income Taxes". Fill out a partial deferred tax adjustment table below.

Problem (e) Prepare journal entry(-ies) for the deferred taxes on 30 June 2020 in accordance with AASB 112 "Income Taxes".