Reference no: EM132913501
Question - Simpson 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:
Account Debit Credit
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 - Machinery 5,900
Vehicles 11,000
Accumulated depreciation - 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 & 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 813,800 813,800
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. Simpson 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. Complete deferred tax worksheet.
2. Complete the general journal entry to account for income tax.
3. Complete statement of comprehensive income for the year ended 30 June 2020 (follow format in the textbook on page 650 - 9th edition, showing one year only).
4. Prepare a balance sheet at 30 June 2020 (follow format in textbook on page 181 - 9th edition, showing one year only).
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 (reference your written work to support your arguments).