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The following information was extracted from the records of Terra Ltd for the year ended 30 June 2024.  TERRA LTD as at 30 lune 2024 Accounts receivable 70,000 Allowance for doubtful debts (15,000) Motor vehicles 280,000 Accumulated depreciation — motor vehicles (56,000) Prepaid insurance 34,000 Rent receivable 2,200 Bad debts expense 22,000 Interest payable 5,000 Rent revenue 7,800 Insurance Expense Ck 18,000 Deterred tax asset 2,100 Deferred tax liability 10,800 Additional information ✓ Estimated useful-life for tax purposes 10 years ✓ Estimated useful-life for accounting 15 years ✓ Rent received 5,000 ✓ Opening balance for prepaid insurance 29,500 ✓ Opening balance for the allowance for doubtful debts 7,000 ✓ Interest expenses 5,000 ✓ Tax rate 30% ✓ Profit before tax 245,300 Prepare the current tax worksheet and related journal entries. b. Prepare the deferred tax worksheet and related journal entries. Here is my question: I received the question you guys answered yesterday night, and I still have some questions about it. why the interest payable should be ignored? why the bad debt written off is $14000 as we know the opening balance for doubtful debt is 7000, and the allowance for Doubtful debt is 15000, bad debt expense is 22,000. In my opinion, bad debt written off is 7000+15000-22000 (I know its wired). How the T-ledge will be? why we don't use the Deffer tax asset (tax loss) in the current tax liability? why the depreciation is just one year amount? I think the information given it's 3 years' amount

The following information was extracted from the records of Terra Ltd for the year ended 30 June 2024.  TERRA LTD as at 30 lune 2024 Accounts receivable 70,000 Allowance for doubtful debts (15,000) Motor vehicles 280,000 Accumulated depreciation — motor vehicles (56,000) Prepaid insurance 34,000 Rent receivable 2,200 Bad debts expense 22,000 Interest payable 5,000 Rent revenue 7,800 Insurance Expense Ck 18,000 Deterred tax asset 2,100 Deferred tax liability 10,800 Additional information ✓ Estimated useful-life for tax purposes 10 years ✓ Estimated useful-life for accounting 15 years ✓ Rent received 5,000 ✓ Opening balance for prepaid insurance 29,500 ✓ Opening balance for the allowance for doubtful debts 7,000 ✓ Interest expenses 5,000 ✓ Tax rate 30% ✓ Profit before tax 245,300 Prepare the current tax worksheet and related journal entries. b. Prepare the deferred tax worksheet and related journal entries. Here is my question: I received the question you guys answered yesterday night, and I still have some questions about it. why the interest payable should be ignored? why the bad debt written off is $14000 as we know the opening balance for doubtful debt is 7000, and the allowance for Doubtful debt is 15000, bad debt expense is 22,000. In my opinion, bad debt written off is 7000+15000-22000 (I know its wired). How the T-ledge will be? why we don't use the Deffer tax asset (tax loss) in the current tax liability? why the depreciation is just one year amount? I think the information given it's 3 years' amount

SWFT Corp Partner Estates Trusts
SWFT Corp Partner Estates Trusts
42nd Edition
ISBN:9780357161548
Author:Raabe
Publisher:Raabe
Chapter14: Taxes On The Financial Statements
Section: Chapter Questions
Problem 36P
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The following information was extracted from the records of Terra Ltd for the year ended 30 June 2024. 

TERRA LTD as at 30 lune 2024 Accounts receivable 70,000 Allowance for doubtful debts (15,000) Motor vehicles 280,000 Accumulated depreciation — motor vehicles (56,000) Prepaid insurance 34,000 Rent receivable 2,200 Bad debts expense 22,000 Interest payable 5,000 Rent revenue 7,800 Insurance Expense Ck 18,000 Deterred tax asset 2,100 Deferred tax liability 10,800

Additional information ✓ Estimated useful-life for tax purposes 10 years ✓ Estimated useful-life for accounting 15 years ✓ Rent received 5,000 ✓ Opening balance for prepaid insurance 29,500 ✓ Opening balance for the allowance for doubtful debts 7,000 ✓ Interest expenses 5,000 ✓ Tax rate 30% ✓ Profit before tax 245,300

Prepare the current tax worksheet and related journal entries. b. Prepare the deferred tax worksheet and related journal entries.

Here is my question: I received the question you guys answered yesterday night, and I still have some questions about it.

why the interest payable should be ignored?

why the bad debt written off is $14000 as we know the opening balance for doubtful debt is 7000, and the allowance for Doubtful debt is 15000, bad debt expense is 22,000. In my opinion, bad debt written off is 7000+15000-22000 (I know its wired). How the T-ledge will be?

why we don't use the Deffer tax asset (tax loss) in the current tax liability?

why the depreciation is just one year amount? I think the information given it's 3 years' amount 

Thanks for your help:)

Journal entry Accounts/Explanations Amount Amount Tax Expense 72,500 To Curret Tax Payable 72,500 Step 3: Computation of Deferred Tax for the year ended 30 June, 2024: Deferred Tax Assets: Excess of bad debts exp. (22000-14000) X 30%= 2400 Interest expense (5000 X 30%) 1,500 Total - DTA 3,900 Deferred Tax Liability: Excess of tax depreciation (28000-18667) X 30% = 2,800 Excess of insurance paid overexpense (22500-18000) X 30%= 1,350 Excess of rent revenue over receipts (7800-5000) X 30% = 840 Total - DTL 4,990
Transcribed Image Text:Journal entry Accounts/Explanations Amount Amount Tax Expense 72,500 To Curret Tax Payable 72,500 Step 3: Computation of Deferred Tax for the year ended 30 June, 2024: Deferred Tax Assets: Excess of bad debts exp. (22000-14000) X 30%= 2400 Interest expense (5000 X 30%) 1,500 Total - DTA 3,900 Deferred Tax Liability: Excess of tax depreciation (28000-18667) X 30% = 2,800 Excess of insurance paid overexpense (22500-18000) X 30%= 1,350 Excess of rent revenue over receipts (7800-5000) X 30% = 840 Total - DTL 4,990
Step 1: Journal Entry The process of recording business transactions in the books of accounts for the first time is known as journal entry. Journal entries become a base for further accounting processes such as preparations of ledgers accounts, trial balances, financial statements, etc. Step 2: a) Computation of Current tax for the year ended 30 June, 2024: Particulars Amount Profit before tax 2,45,300 Add: Depreciation as per income statement (280000/15) Less: Depreciation as per tax (280000/10) 18,667 -28,000 Add: Bad debt expense 22,000 Less: Bad debts written off (7000+22000-15000) -14,000 Add: Insurance expense 18,000 Less: Insurance paid (34000-29500+18000) -22,500 Add: Interest expenses as not paid 5,000 Less: Rent revenue -7,800 Add: Rent re ce ived 5,000 Taxable value 2,41,667 Current Tax (241667 X 30%) 72,500
Transcribed Image Text:Step 1: Journal Entry The process of recording business transactions in the books of accounts for the first time is known as journal entry. Journal entries become a base for further accounting processes such as preparations of ledgers accounts, trial balances, financial statements, etc. Step 2: a) Computation of Current tax for the year ended 30 June, 2024: Particulars Amount Profit before tax 2,45,300 Add: Depreciation as per income statement (280000/15) Less: Depreciation as per tax (280000/10) 18,667 -28,000 Add: Bad debt expense 22,000 Less: Bad debts written off (7000+22000-15000) -14,000 Add: Insurance expense 18,000 Less: Insurance paid (34000-29500+18000) -22,500 Add: Interest expenses as not paid 5,000 Less: Rent revenue -7,800 Add: Rent re ce ived 5,000 Taxable value 2,41,667 Current Tax (241667 X 30%) 72,500
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