Tutorial solution Week 6 - ACCY200 FINANCIAL ACCOUNTING IIA...

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ACCY200 FINANCIAL ACCOUNTING IIA SPRING 2009 WEEK 6 TUTORIAL SOLUTIONS: LEO Chapter 4 Practice question 4.4 Part B only, 4.9, 4.13 Part B only. QUESTION 4.4: Tax loss Required: A. Calculate taxable income (tax loss) for the current year on an appropriate worksheet as shown in figure 4.3 (p 144). B. If depreciation, long-service leave and bad and doubtful debts are the only items causing temporary differences, prepare all journal entries to account for income tax assuming recognition criteria are satisfied. A. TAMBORINE LTD Determination of Taxable Income (for year ended 30 June 2011) Accounting loss before income tax $(80 000) Add: Doubtful debts expense 3 000 Depreciation of plant 7 000 Long service leave expense 4 000 14 000 Deduct: 66 000 Bad debts written off 2 000 Long service leave for tax - Depreciation of plant for tax 8 000 (10 000) Tax loss (76 000) Current tax liability @ 30% $- B. A taxable temporary difference will arise from the depreciation, leading to the recognition of a deferred tax liability of $300 (= 30% x $1 000). Deductible temporary differences will arise from the increase in the long service leave payable and on the net receivables balance from bad and doubtful debts, causing the deferred tax asset to have a balance of $1 500 (= 30% x ($4 000 + $3 000 - $2 000). As there were beginning balances of $15 000 and $18 000 in the deferred tax
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This note was uploaded on 12/13/2010 for the course ACCY 201 taught by Professor Kevin during the Three '09 term at University of Wollongong, Australia.

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Tutorial solution Week 6 - ACCY200 FINANCIAL ACCOUNTING IIA...

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