Reference no: EM132913800
Bright Ltd recorded an accounting profit before income tax of $500,000 for the year ended 30 June 2021 that included the following:
Depreciation of machinery $85,000
Royalty revenue 45,000
Rent expense 35,000
Annual leave expense 30,000
Impairment of goodwill expense 20,000
Doubtful debts expense 10,000
Additional information:
- No income tax deduction is allowed in relation to the impairment of goodwill expense.
- Tax depreciation for the machinery for the year was $60,000.
- Royalties received in cash during the year amounted to $40,000.
- Cash payments of $25,000 for annual leave and $28,000 for rent were made during the year.
- Total bad debts written off during the year amounted to $12,000.
- The company income tax rate is 30%.
Required
Problem (a) Calculate the current tax of Bright Ltd for the year ended 30 June 2021 and prepare the required tax journal entry.
Problem (b) Black Ltd is preparing its deferred tax worksheet for the year ending 30 June 2021. For each of the following items, calculate (1) the tax base and (2) the temporary difference. Identify whether the temporary difference is taxable or deductible.
i. Plant equipment: cost of $200,000, accumulated depreciation for accounting is $50,000 whilst accumulated depreciation for tax is $70,000.
ii. Goodwill of $90,000 and accumulated impairment losses of $40,000.
iii. Machine: cost of $400,000, accumulated depreciation for accounting is $180,000 whilst accumulated depreciation for tax is $150,000.
Provision for long-service leave of $90,000.