HI5020 Corporate Accounting - Tutorial Questions Assessment

Question 1

At 30 June 2019, Beta Ltd had the following deferred tax balances:

Deferred tax liability $18,000
Deferred tax asset 15,000

Beta Ltd recorded a profit before tax of $80,000 for the year to 30 June 2020, which included the following items:

Depreciation expense – plant $7,000
Doubtful debts expense 3,000
Long-service leave expense 4,000

For taxation purposes the following amounts are allowable deductions for the year to 30 June 2020:

Tax depreciation – plant $8,000
Bad debts written off 2,000

Depreciation ratesfor taxation purposes are higher than for accounting purposes. A corporate tax rate of 30% applies.

Required:

1. Determine the taxable income and income tax payable for the year to 30 June 2020. (2.5 Marks)
2. Determine by what amount the balances of the deferred liability and deferred tax asset will increase or decrease for the year to 30 June 2020 because of depreciation, doubtful debts and long-service leave. (3 marks)
3. Prepare the necessary journal entries to account for income tax assuming recognition criteria are satisfied. (2.5 marks)
4. What are the balances of the deferred tax liability and deferred tax asset at 30 June 2020? (2 marks)

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