Reference no: EM132255030
Question - At 30 June 2017, Kelly Ltd had the following deferred tax balances:
Deferred tax liability $18,600
Deferred tax asset 15,000
Kelly Ltd recorded a profit before tax of $80?000 for the year to 30 June 2018, which included the following items:
Depreciation expense - plant $7,000
Doubtful debts expense 3,000
Long-service leave expense 6,000
For taxation purposes the following amounts are allowable deductions for the year to 30 June 2018:
Tax depreciation - plant $8,000
Bad debts written off 2,000
Depreciation rates for taxation purposes are higher than for accounting purposes. A corporate tax rate of 30% applies.
Required
1. Prepare a current tax worksheet to determine the taxable income for the year to 30 June 2018.
2. Determine by what amount the balances of the deferred tax liability and deferred tax asset will increase or decrease for the year to 30 June 2018 because of depreciation, doubtful debts and long-service leave.
3. Prepare all journal entries to account for income tax assuming recognition criteria are satisfied.
4. What are the balances of the deferred tax liability and deferred tax asset at 30 June 2018?