Reference no: EM13342707
PART A
The following information is provided in respect of Fedyou Ltd for calculation of income tax as required by Accounting Standard AASB112 Income Taxes
Fedyou Ltd commenced operations on 1 July 2007 with an issued share capital of $700,000. On that date the company purchased a number of property plant and equipment (PPE) assets, details of which are provided below:
Land Plant Computers Vehicles
Cost $100,000 $200,000 $100,000 $50,000
Depreciation
Rate:
Accounting - 15% 25% 30%
Tax - 10% 50% 40%
Method Straight Straight Straight
Line Line Line
Carrying Amount
30 June 2008 150,000 170,000 75,000 35,000
The Statement of Profit and Loss for the year ended 30 June 2008 was as follows:
Sales $520,000
Interest Revenue 40,000
Government Grant (exempt from tax) 40,000
Total Revenue 600,000
Cost of Goods Sold 200,000
Salaries and Wages 60,000
Depreciation Plant 30,000
Depreciation Computers 25,000
Depreciation Vehicles 15,000
Rent 18,000
Doubtful Debts 30,000
Insurance 5,000
Long Service Leave 3,000
Other Expenses 9,000
Total Expenses 395,000
Profit before Tax 205,000
Additional Information:
- The current tax rate is 30%
- Insurance of $23,000 was paid during the year. Of this amount $18,000 was considered to be prepaid for the coming financial year
- Rent is paid in arrears. $10,000 is due at end of current year and $8000 has been paid in cash.
- Interest Revenue will be received in the coming financial year.
- No bad debts were written off during the current year
- No payments for long service leave were made during the current year.
At 30 June 2008 the Statement of Financial Position of Fedyou Ltd was as follows:
Assets
000
Cash 805
Prepayments 18
Receivables 300
Less
Allowance for Doubtful Debts 30 270
Inventory 170
Property Plant and Equipment 500
Less:
Accumulated Depreciation 70 430
Interest Receivable 40
Total Assets 1733
Liabilities
Accounts Payable 280
Accrued Expenses 10
Loan 485
Long Service Leave Provision 3
Deferred Tax Liability 15
Total Liabilities 793
Equity
Share Capital 700
Retained Profits 205
Asset Revaluation Surplus 35
Total Equity 940
Total Liabilities and Equity 1733
Additional information:
- Land was revalued upward by $50,000 at 30 June 2008
- The written down values for tax purposes at 30 June 2008 for other PPE assets were Plant $180,000, Computers $50,000 and Vehicles $30,000.
Required:
- Calculate taxable income and current tax liability for Fedyou Ltd for year ended 30 June 2008 including journal entry to record these amounts (show all workings)
- Prepare a deferred tax worksheet to calculate the balances of any deferred tax assets and liabilities at 30 June 2008 and prepare required journal entry.