Reference no: EM132826159

The following information was extracted from the records of Rivers Ltd as at 30 June 2021.

                                            Carrying amount                      Tax base

Asset (liability)

Accounts receivable            $350 000                        $375 000

Motor vehicles                     265 000                         205 000

Provision for warranty                   (32 000)                       0

The depreciation rates for accounting and taxation are 15% p.a. and 25% p.a. respectively. Warranty costs are deductible when paid. An allowance for doubtful debts of $25 000 has been raised against accounts receivable for accounting purposes, but such debts are deductible only when written off as uncollectable.

Required

Problem 1: Prepare a deferred tax worksheet and calculate the temporary differences for Rivers Ltd as at 30 June 2021. Justify your classification of each difference as either a deductible temporary difference or a taxable temporary difference. (6 marks)

Problem 2: Prepare the journal entry to record deferred tax for the year ended 30 June 2021 assuming no deferred items had been raised in prior years.