Reference no: EM132585012

Following is the adjustment of accounting income and taxable income for Jimmy Bhd on August 31, 2019, which is the first year of its operation. The corporate tax rate is 23%. The Company uses MFRS 112 Income Taxes for the purpose of accounting for and reporting deferred tax.

Pre-tax accounting income RM700,000
Spend 70,000 warranty allocation
Rental revenue has not been earned 50,000
Research and development costs (60,000)
Pollution fines are imposed by DBKL 5,000
Taxable income 765,000

1. Research and development costs amounting to RM60,000 have been capitalized as an intangible asset and amortized over a five-year period beginning in 2020.

2. Pollution penalty was paid in July 2019.

3. It is estimated that the warranty expenses that have been allocated will be paid in 2020.

4. Unearned rental income will be recognized as revenue in 2021.

Be required:

Question 1: Discuss why accounting income differs from taxable income.

Question 2: Identify and discuss the permanent and temporary differences for the above transactions.

Question 3: Prepare a schedule to determine deferred tax assets and liabilities for the financial year 31 August 2019 and 2020.

Question 4: Prepare journal entries to record tax expenses, deferred tax and tax payable for the financial year by 31 August 2019 financial accounting 2