Question 1What is the main principle of tax-effect accounting as outlined in AASB 112/IAS 12?Answer: XXQuestion 2How are the current and future tax consequences of transactions accounted for? Answer: XXQuestion 3What is an ‘exempt income’ and how does it affect the calculation or recovery of carry‐forward tax losses?Answer:XXQuestion 4Calculation of Current Tax Liability (CTL) SydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available. Statement of Profit or Loss and other Comprehensive IncomeFor the year ended 30 June 2021Gross Profit$510,000Salaries expenses(210,000)Rent expense(52,000)Long service leave expenses(50,000)Depreciation expense - Plant(30,000)Bad debt expense(19,000)Accounting Profit Before Tax$149,000 The Statement of Financial Position (Extract/partial)As at 30 June 2021Assets: Cash$152,000Inventories198,000Account receivables (net)179,000Prepaid rent51,000Plant150,000Accumulated depreciation - plant(30,000) 700,000Liabilities: Revenue received in advance52,000Accounts payable90,000Loan payable210,000Provision for long service leave48,000 $400,000Additional informationThe company tax rate is assumed to be 30%.All salaries have been paid as at year end and are deductible for tax purposes.None of the long service leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid.Rent was paid in advance on 1 July 2020. Actual amounts paid are allowed as a tax deduction.Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off.The revenue received in advance is included in the taxable income.The machinery is depreciated on a straight-line basis over 5 years for accounting purposes, but over 4 years for taxation purposes. The machinery is not expected to have any residual value. RequiredPrepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2021.Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts. Answer Template for CTL:SydMel LtdCurrent Tax Worksheet(for year ended 30 June 2021) $$Accounting profit Add (AD items*): Deduct (BC items*): Taxable profit Tax payable @ 30% *Refer to our analogies used in last week lecture – ‘A’ for recognised accrual accounting Expenses, ‘B’ for recognised accrual accounting Income, ‘C’ for deductible tax expense amount and ‘D’ for Tax recognisable Income. Workings: Rent paid: XX Depreciation of machinery for tax purposes: XX The entry to recognise current tax is: DateDescription Dr $Cr $

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Question 1What is the main principle of tax-effect accounting as outlined in AASB 112/IAS 12?Answer: XXQuestion 2How are the current and future tax consequences of transactions accounted for? Answer:  XXQuestion 3What is an ‘exempt income’ and how does it affect the calculation or recovery of carry‐forward tax losses?Answer:XXQuestion 4Calculation of Current Tax Liability (CTL) SydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available. Statement of Profit or Loss and other Comprehensive IncomeFor the year ended 30 June 2021Gross Profit$510,000Salaries expenses(210,000)Rent expense(52,000)Long service leave expenses(50,000)Depreciation expense - Plant(30,000)Bad debt expense(19,000)Accounting Profit Before Tax$149,000  The Statement of Financial Position (Extract/partial)As at 30 June 2021Assets: Cash$152,000Inventories198,000Account receivables (net)179,000Prepaid rent51,000Plant150,000Accumulated depreciation - plant(30,000) 700,000Liabilities: Revenue received in advance52,000Accounts payable90,000Loan payable210,000Provision for long service leave48,000 $400,000Additional informationThe company tax rate is assumed to be 30%.All salaries have been paid as at year end and are deductible for tax purposes.None of the long service leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid.Rent was paid in advance on 1 July 2020. Actual amounts paid are allowed as a tax deduction.Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off.The revenue received in advance is included in the taxable income.The machinery is depreciated on a straight-line basis over 5 years for accounting purposes, but over 4 years for taxation purposes. The machinery is not expected to have any residual value. RequiredPrepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2021.Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts. Answer Template for CTL:SydMel LtdCurrent Tax Worksheet(for year ended 30 June 2021) $$Accounting profit  Add (AD items*):                       Deduct (BC items*):                 Taxable profit  Tax payable @ 30%   *Refer to our analogies used in last week lecture – ‘A’ for recognised accrual accounting Expenses, ‘B’ for recognised accrual accounting Income, ‘C’ for deductible tax expense amount and ‘D’ for Tax recognisable Income.  Workings: Rent paid:  XX Depreciation of machinery for tax purposes:  XX  The entry to recognise current tax is:                                                           DateDescription Dr $Cr $

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Date	Description	Dr $	Cr $

Statement of Profit or Loss and other Comprehensive Income For the year ended 30 June 2021
Gross Profit	$510,000
Salaries expenses	(210,000)
Rent expense	(52,000)
Long service leave expenses	(50,000)
Depreciation expense - Plant	(30,000)
Bad debt expense	(19,000)
Accounting Profit Before Tax	$149,000

The Statement of Financial Position (Extract/partial) As at 30 June 2021
Assets:
Cash	$152,000
Inventories	198,000
Account receivables (net)	179,000
Prepaid rent	51,000
Plant	150,000
Accumulated depreciation - plant	(30,000)
	700,000
Liabilities:
Revenue received in advance	52,000
Accounts payable	90,000
Loan payable	210,000
Provision for long service leave	48,000
	$400,000

	$	$
Accounting profit
**Add (AD items):***







**Deduct (BC items):***





Taxable profit
Tax payable @ 30%