Prepare the appropriate journal entry to account

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Question - The company tax rate is 30%.

(i) Forrest Ltd's statement of financial position includes a 'Provision for Warranty Expense' amounting to $100 000 as at 30 June 2020. The provision was created in the current financial year (ending 30 June 2020) and no amounts have been paid.

(ii) Foo Ltd has received $30 000 subscription income in advance. The Australian Tax Office taxes revenue when received.

Required - For each of the following:

(a) Calculate the tax base of the asset or liability showing all workings and formula applied,

(b) Determine whether the temporary difference leads to a deferred tax asset or liability as well as explain your rationale, and

(c) Prepare the appropriate journal entry to account for the temporary difference between carrying amount and tax base.

Reference no: EM132924372

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