Reference no: EM133185857
Question - David Ltd commences operations on 1 July 2018
On the same date, it purchases a machine at a cost of $,1000,000
The machine is expected to have a useful life of five years, with benefits being uniform throughout its life. It will have no residual value at the end of five years
Hence, for accounting purposes the depreciation expense would be $200,000 per year
For taxation purposes, the ATO allows the company to depreciate the asset over four years-that is, $250,000 per year
The profit before tax of the company for each of the next five years (years ending 30 June) is $600,000, $700,000, $800,000, 900,000 and $10,00,000 respectively
The tax rate is 30 per cent.
Required -
a) Calculate taxable profit on 30 June 2020.
b) Record the necessary journal entries on 30 June 2020.
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