Reference no: EM133007371
Lowsales Ltd has the following extract from the statement of financial position as at 30 June 2021:
$
Cash at bank 97,000
Accounts Receivable (net) 234,000
Prepaid Rent 4,000
Inventory 228,000
Equipment (net) 48,000
Total Assets 611,000
Accounts Payable 67,000
Revenue Receved in Advance 18,000
Bank Loan 100,000
Foreign Currency Loan Payable 32,000
Employee Benefits Liability 65,000
Total Liabilities 282,000
The following information is relevant for Lowsales Ltd:
- Revenue received in advance is recognised in the statement of financial position of Lowsales Ltd and will be recognised in their statement of comprehensive income when the revenue is earned.
- The employee benefits liability increases with additional employee expenses and decreases when the liability is paid.
- For tax purposes, deductions can only be claimed for bad debts written off. As at 30 June 2021, the allowance for doubtful debts was $11,000 and the allowance had increased by $5,000. The revenue relating to the accounts receivable has already been taxed.
- The equipment was originally purchased four years ago for $80,000. The equipment is being deducted for tax purposes over eight years and for accounting purposes over 10 years.
- The foreign currency loan payable was originally drawn down at $33,000. The $1,000 gain included in the statement of comprehensive income is not included in the taxable profit until the loan is settled.
- Prepaid rent has increased by $2,000 during the year. The additional outlay can be claimed as a tax deduction when paid.
- The opening deferred tax asset balance is $16,200 and the opening deferred tax liability balance is $2,400. The taxable profit for the financial year ended 30 June 2021 is $331,000. Assume a tax rate of 30%.
Required:
Problem 1: Calculate the relevant temporary differences and deferred taxes in a worksheet and show the movements between the deferred taxes.
Problem 2: Prepare the journal entries to record the deferred tax assets, deferred tax liability, and the current income tax for the year ended 30 June 2021.