The draft Statement of Financial Position of Lilly Ltd at 30 June 2023 and 30 June 2022 included the following assets and liabilities: 2023 2022 $$ Accounts receivable 70,000 50,000 Allowance for doubtful debts (10,000) (5,000) Interest receivable 20,000 25,000 Plant 210,000 210,000 Accumulated depreciation - plant (63,000) (42,000) Deferred tax asset - 23,000 Rent revenue received in advance 8,000 4,000 Provision for long service leave 30,000 40,000 Deferred tax liability - 24,000 Additional information: For accounting purposes plant is depreciated using the straight line method over 10 years. For tax purposes plant is depreciated using the straight line method over 7 years. The company tax rate is 30%. Required: Complete the deferred tax worksheet and prepare any necessary journal entries to adjust deferred tax accounts for the year ended 30 June 2023.
The draft Statement of Financial Position of Lilly Ltd at 30 June 2023 and 30 June 2022 included the following assets and liabilities: 2023 2022 $$ Accounts receivable 70,000 50,000 Allowance for doubtful debts (10,000) (5,000) Interest receivable 20,000 25,000 Plant 210,000 210,000 Accumulated depreciation - plant (63,000) (42,000) Deferred tax asset - 23,000 Rent revenue received in advance 8,000 4,000 Provision for long service leave 30,000 40,000 Deferred tax liability - 24,000 Additional information: For accounting purposes plant is depreciated using the straight line method over 10 years. For tax purposes plant is depreciated using the straight line method over 7 years. The company tax rate is 30%. Required: Complete the deferred tax worksheet and prepare any necessary journal entries to adjust deferred tax accounts for the year ended 30 June 2023.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 103.4C
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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