80.2K

Verified Solution

Link Copied!

In the answer below, I'm not sure how to get 50,000 in tax base column, Furniture and Fittings row.

SHENGLI LTD

Deferred tax worksheet

as at 30 June 2024

	Carrying Amount	Tax Base	Taxable Temporary Differences	Deductible Temporary Differences
	$	$	$	$
Relevant Assets
Accounts receivable	90 000	100 000		10 000
Prepaid rent	25 000	0	25 000
Furniture and fittings	60 000	50 000	10 000

Question:

Calculation of current and deferred tax, and adjustment

Shengli Ltd commences operations on 1 July 2023. One year later, on 30 June 2024, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available.

Statement of comprehensive income for the year ended 30 June 2024
Gross profit	$	250000
Wages expense		(100000	)
Annual leave expense		(25000	)
Bad debts expense		(10000	)
Rent expense		(25000	)
Depreciation expense furniture and fittings		(15000	)
Accounting profit before tax		75000

Assets and liabilities as disclosed in the statement of financial position as at 30 June 2024
Assets
Cash		$	75000
Inventories			100000
Accounts receivable (net)			90000
Prepaid rent			25000
Furniture and fittings			75000	)
Accumulated depreciation furniture and fittings			(15000
			350000
Liabilities
Accounts payable			50000
Revenue received in advance			25000
Loan payable			100000
Provision for annual leave			25000
			200000

Additional information

• The company tax rate is assumed to be 30%.
• All salaries have been paid as at year end and are deductible for tax purposes.
• None of the annual leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid.
• Rent was paid in advance on 1 July 2023. Actual amounts paid are allowed as a tax deduction.
• Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off.
• The revenue received in advance is included in the taxable income.
• The furniture and fittings is depreciated on a straight-line basis over 5 years for accounting purposes, but over 3 years for taxation purposes. The furniture and fittings is not expected to have any residual value.

Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts.

Answer & Explanation Solved by verified expert

See Answer