Legt1710 Assignment 1

PROBLEMS Problem 8.1 Current and deferred tax Kilcoy Ltd Current Tax Worksheet (for year ended 30 June 2010) | $ | $ | Accounting profit | | 256 700 | Add: | | | Entertainment expense (non deductible) | 1 700 | | Depreciation – buildings (non deductible) | 7 600 | | Depreciation – plant | 22 500 | | Insurance expense | 4 200 | | Development expenditure | 15 000 | | Doubtful debts expense | 4 100 | | Annual leave expense | 46 000 | 101 100 | | | | Deduct: | | 357 800 | Royalty revenue (tax exempt) | 8 000 | | Bad debts written off | 3 500 | | Annual leave paid | 52 000 | | Insurance paid | 3 700 | | Depreciation – plant (tax) | 30 000 | | Gain – Sale of buildings (non assessable) | 5 000 | (102 200) | Taxable income | | 255 600 | Add back exempt income | | 8 000 | | | 263 600 | Tax loss recouped | | (12 500) | Taxable income | | 251 100 | Tax payable @ 30% | | 75 330 | Less quarterly tax paid | | (53 500) | Current tax liability | | 21 830 | Workings: Depreciation of plant for tax purposes: $150 000 x 20% = $30 000. Accumulated depreciation for tax purposes is $30 000 x 3 = $90 000.

The entry to recognise current tax is: Income Tax Expense (current) Dr 25 580 Current Tax Liability Cr 21 830 Deferred Tax Asset Cr 3 750

Problem 8.1 (Cont’d)

Kilcoy Ltd
Deferred tax worksheet

| Carrying Amount | Future Taxable Amount | Future Deductible Amount | Tax Base | Taxable Temporary Differences | Deductible Temporary Differences | | $ | $ | $ | $ | $ | $ | Relevant Assets | | | | | | | Receivables | 17 400 | 0 | 4 100 | 21 500 | | 4 100 | Prepaid insurance | 4 500 | (4 500) |