Reference no: EM131822144
The draft statement of profit or loss of That's Alright Ltd for the year ended 30 June 2017 showed a profit before tax of $22 240, included the following items of income and expense:
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 2017 is $40 250 (2016: $35 000).
(c) In the year ended 30 June 2016, the company recorded a tax loss. At 1 July 2016 carry forward tax losses amounted to $16 900. The company recognised a deferred tax asset in respect of these tax losses at 30 June 2016.
(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
A. Prepare the current tax worksheet for the year ended 30 June 2017 and the applicable tax entries.
B. 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 2016?
C. Prepare the deferred tax worksheet as at 30 June 2017 and the applicable tax entries.
D. Discuss whether the company should
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