Reference no: EM132476320

DaJen Ltd prepared a draft statement of profit and loss (P/L) for the year ended 30 June 2019 which showed a profit before tax of $24 420.

The P/L included the following items of income and expense:

Government grant (exempt from tax)                     5 000

Proceeds on sale of plant                                     23 000

Bad debts expense                                                 8 100

Depreciation expense - plant                                   14 000

Insurance expense                                                  12 900

Long-service leave expense                                      14 500

Impairment of goodwill                                              11 100

Additional information

(a) For tax purposes the carrying amount of plant sold was $15 000.

(b)The tax deduction for plant depreciation was $20 250. The accumulated depreciation on plant for tax purposes at 30 June 2019 is $40 250 (2018: $35 000).

(c)In the year ended 30 June 2018, the company recorded a tax loss. At 1 July 2018 carry forward tax losses amounted to $16 900. The company recognised a deferred tax asset in respect of these tax losses at 30 June 2018.

(d)Tax losses carried forward must be offset against any exempt income before being used to reduce taxable income.

(e)The company does not set off deferred tax liabilities and assets and the corporate tax rate is 30%.

Required

Question A. Prepare the current tax worksheet for the year ended 30 June 2019 and the tax journal entries.

Question B. Prepare the deferred tax worksheet as at 30 June 2019 and the tax journal entries.

Question C. Discuss the factors the company should have considered before recognising a deferred tax asset with respect to the tax loss incurred in the year ended 30 June 2018?

Attachment:- current tax.rar