Reference no: EM13829719

Mulga Woods Ltd transports timber from forests to sawmills in central Victoria. The following is an extract of its financial statements:

Profit or Loss Account for the year ended 30 June 2015

			$
Gross profd from trading			418	500
Interest income			10	600
Less: Expenses
Annual leave	2	400
Borrowing costs	1	500
Depreciation on vehicles	2	200
Doubtful debts expense	2	200
Insurance	14	400
Motor vehicle expense	2	300
Rent on premises	60	000
Salaries and wages	124	000
Service warranty expenses	2	800
Other expenses	125	100	336	900
Net Profit before income tax			$92	200

Assets and liabilities included in the Statement of Financial Position for the last two years for Mulga Woods Ltd include:

	30 June 2015				30 June 2014
Assets
Cash			143	800			139	800
Accounts receivable	100	000			75	000
Less provision for doubtful debts	5	000	95	000	4	000	71	000
Borrowing costs	9	000						-
Less expense for year	1	500	7	500				-
Inventory			45	000			35	000
Prepaid insurance			1	200				600
Accrued interest income			2	000				-
Deferred tax asset							2	640
Motor vehicles	22	000			22	000
Less accumulated depreciation	4	400	17	600	2	200	19	800
Investments				-			50	000
Liabilities
Deferred tax liability				?				510
Accounts payable			66	000			31	200
Provision for annual leave			5	200			3	600
Provision for service warranties			4	000			1	200
Mortgage payable			90	940	_		50	400

The following items are treated differently for taxation purposes than for accounting purposes:

• Borrowing costs are fully deductible for tax purposes when paid.

• Annual leave is expensed during the year but is not deductible for tax purposes until paid.

• Service warranty expense is only allowable as a tax deduction when paid.

• The company accrues doubtful debts expense, however only the bad debt is allowable as a tax deduction when the bad debt is written off.

• The motor vehicle is depreciated on a straight-line basis. For the current year, the depreciation for tax purposes is $3 300. The tax base of the motor vehicle at 30 June 2014 was $18 700.

• Insurance actually paid is allowed as a tax deduction.

• Interest income is tax assessable only if it is received in cash.

• The company tax rate is 30%.

REQUIRED:

Submit your answer on the Question THREE Proforma For Mulga Woods Ltd:

(a) Calculate the taxable income and the current tax liability for financial year ended 30 June 2015.

(b) Prepare the journal entry to recognise current tax liability.

(c) Calculate the deferred tax asset and deferred tax liability balances as at 30 June 2015. Show your calculations using the deferred tax worksheet as provided in the proforma.

(d) Prepare the tax-effect journal entries for the year ended 30 June 2015.