Solution 6.14 and 6.15 - ACCY 200 Question 6.14 SUGGESTED...

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ACCY 200SUGGESTED SOLUTIONAUTUMN 2015Question 6.14Current and deferred tax worksheets, change in tax rateand tax entriesThe profit before tax of Perfect Skin Ltd for the year ended 30 June 2017 is $600 000and includes the following revenue and expense items:Rent revenueGovernment grant received (exempt from tax)Bad debts expenseDepreciation expense – plantLong-service leave expenseAnnual leave expenseOffice supplies expenseEntertainment expensesDepreciation expense – buildings$30 00010 00060 00050 00045 00030 00015 00018 0008 000Extracts from the statements of financial position of the company at 30 June 2017 and30 June 2016 showed the following assets and liabilities:PERFECT SKIN LTDStatement of Financial Position (Extract)as at 30 June20172016AssetsCashInventoryAccounts receivableAllowance for doubtful debtsOffice suppliesPlantAccumulated depreciationBuildingsAccumulated depreciationGoodwillDeferred tax assetLiabilitiesAccounts payableProvision for employee benefitsRent received in advanceDeferred tax liability$80 000170 000500 000(55 000)25 000500 000(260 000)300 000(148 000)70 000?290 000100 00025 000?$85 000155 000480 000(40 000)22 000500 000(210 000)300 000(140 000)70 00040 500260 00075 00020 00038 100Additional information(a)Entertainment costs and depreciation of buildings are not allowed as tax deductions.
(b)Accumulated depreciation of plant for tax purposes was $315 000 at 30 June 2016,and depreciation for tax purposes for the year ended 30 June 2017 amounted to$75 000.
(c) Office supplies are claimed as a tax deduction when purchased. Rent is taxed whenreceived.(d)Assume a tax rate of 30% for the year ended 30 June 2017.RequiredA. Prepare a current tax worksheet for the year ended 30 June 2017 to calculate taxableincome and the company’s current tax liability, and then record the entries forcurrent tax.B. Prepare a deferred tax worksheet as at 30 June 2017 to calculate the end-of-periodadjustments required for the deferred tax asset and liability accounts, and thenrecord the entries for deferred tax.C. Assume that the government decided, after the election in August 2016, to change theincome tax rate for the year ended 30 June 2017 from 30% to 35%. Show the impactof the change in the tax rate on the journal entries prepared under requirements Aand B, and prepare any additional entries that may be required.
Workings:Bad Debts written of

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Term
Three
Professor
KEVIN
Tags
Accounting, Depreciation, Deferred tax

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