Reference no: EM132476821
Raj Ltd prepared a draft statement of profit and loss (P.L) for the 'ear ended 30 June 2019 which showed a profit before tax of S21 120. The P included the faulting items of Income and expense:
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Government grant (exempt from tax)
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5 000
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Proceeds on sale of plant
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23 000
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Bad debts expense
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8 100
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Depreciation expense - plant
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14000
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Insurance expense
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12900
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Long-service leave expense
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14 500
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Impairment of goodwill
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11 100
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Carrying amount of plant sold
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20000
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The Statements of financial position of Raj Ltd at 30 lime 2019 and 30 June 2018 include the following assets and liabilities:
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RAI LTD
Statement of Financial Position (Extract)
as at 30 June
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2019
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2018
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Assets
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Cash
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S
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6 000
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$
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18 000
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Accounts receivable
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96 000
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85000
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Allowance for doubtful debts
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(6 800)
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(5 200)
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Prepaid insurance
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3 400
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5 600
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Plant
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140000
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170000
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Accumulated depreciation - plant
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(32 000)
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(28 000)
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Goodwill
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22 200
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22 200
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Accumulated impairment losses
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(11 100)
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-
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Deferred tax asset
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?
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9 540
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Liabilities
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Accounts payable
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78 000
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76000
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Provision for long-service leave
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13 200
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9 700
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Current tax liability
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?
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-
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Deferred tax liability
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?
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3780
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Additional Information :
(a) For tax purposes the carrying amount of plant sold was SIS 000.
(b) The tax deduction for plant depreciation was 520 250. The accumulated depreciation on plant for tax purposes at 30 fine 2019 is $40 250 (2018: 535 000).
(c) In the year ended 30 June 2018, the company recorded a tax loss. At 1 July 2018 carry forward tax losses amounted to $16 900. The company recognised a deferred tax asset in respect of these tax losses at 30 June 2018.
(d) Tax losses carried forward must be offset against any exempt income before being used to reduce taxable income.
(e) The company does not set off deferred tax liabilities and assets and the corporate tax rate is 30%.
Question 1: Prepare the deferred tax worksheet as at 30 June 2019 and the tax journal entries. Discuss the factors the company should have considered before recognising a defined tax asset with respect to the tax loss Incurred In the year ended 30 Jane 2018?
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