Question 1 At 30 June 2019, Beta Ltd had the following deferred tax balances: Deferred tax lability Deferred tax asset $18,000 15,000 Beta Ltd recorded a profit before tax of s80,000 for the year to 30 June 2020, which included the following items: Depreciation expense - plant $7,000 Doubtful debts expense Long-service leave expense 3,000 4,000 For taxation purposes the following amounts are allowable deductions for the year to 30 June 2020: Tax depreciation - plant Bad debts written off $8,000 2,000 Depreciation rates for taxation purposes are higher than for accounting purposes. A corporate tax rate of 30% applies. Required: a) Determine the taxable income and income tax payable for the year to 30 June 2020. b) Determine by what amount the balances of the deferred liability and deferred tax asset will increase or decrease for the year to 30 June 2020 because of depreciation, doubtful debts and long-service leave. c) Prepare the necessary journal entries to account for income tax assuming recognition criteria are satisfied.. d) What are the balances of the deferred tax liability and deferred tax asset at 30 June 20207
Question 1 At 30 June 2019, Beta Ltd had the following deferred tax balances: Deferred tax lability Deferred tax asset $18,000 15,000 Beta Ltd recorded a profit before tax of s80,000 for the year to 30 June 2020, which included the following items: Depreciation expense - plant $7,000 Doubtful debts expense Long-service leave expense 3,000 4,000 For taxation purposes the following amounts are allowable deductions for the year to 30 June 2020: Tax depreciation - plant Bad debts written off $8,000 2,000 Depreciation rates for taxation purposes are higher than for accounting purposes. A corporate tax rate of 30% applies. Required: a) Determine the taxable income and income tax payable for the year to 30 June 2020. b) Determine by what amount the balances of the deferred liability and deferred tax asset will increase or decrease for the year to 30 June 2020 because of depreciation, doubtful debts and long-service leave. c) Prepare the necessary journal entries to account for income tax assuming recognition criteria are satisfied.. d) What are the balances of the deferred tax liability and deferred tax asset at 30 June 20207
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 4E: Single Temporary Difference: Multiple Rates At the end of 2019, Fulhage Company reported taxable...
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