Calculate the taxable income/tax loss and the current tax liability (if any) for the financial year ended 30th June 2023. Prepare a journal entry to recognise the current tax liability/tax loss.
Background information
The profit before tax, reported in the statement of comprehensive income of Burwood Ltd for the year ended 30 June amounted to: 10,680,000
2023
Subscription revenue Government award income Doubtful debts expense Depreciation (Equipment) Depreciation (Buildings) Maintenance expense Employee benefits expense Rent expense Entertainment expense
333,000 600,000 66,000 433,800 106,000 300,000 200,000 100,000 166,800
The draft statements of financial position of the company at 30 June 2023 and 2022 showed the following assets and liabilities: 2023 ($) Assets Cash 700,000 Inventory 1,501,000 Accounts receivable 4,338,000 Allowance for doubtful debts (347,000) Prepaid rent 186,000 Equipment 4,338,000 Accumulated depreciation - Equipment (2,169,000) Buildings 2,670,000 Accumulated depreciation - Buildings (1,068,000) Land 1,668,000 Goodwill (net) 667,000 Deferred tax asset ?
2022 ($)
767,000 1,368,000 4,138,000 (320,000) 173,000 4,338,000 (1,735,200) 2,670,000 (961,000) 1,668,000 667,000 189,888
Liabilities Accounts payable Provision for maintenance Provision for employee benefits Subscription received in advance Deferred tax liability
2,536,000 534,000 367,000 233,000 ?
2,269,000 400,000 267,000 166,000 0
Additional Information: Subscription revenue is tax assessable when it is received in cash Government award income is not tax assessable Doubtful debts are tax deductible when the company actually incurs bad debts/write off For accounting purpose, the equipment is depreciated using the annual straight line method at a rate of: For tax purpose, however, the equipment is depreciated using the annual straight line method at a rate of: Depreciation of buildings is not allowed as tax deductions and goodwill is not tax assessable Employee benefits are tax deductible when they are paid in cash to the employees Rent expense and maintenance expense are tax deductible when paid in cash Entertainment expense is not allowed as tax deduction
10% 12%
30%
Required: Calculate the taxable income/tax loss and the current tax liability (if any) for the financial year ended 30 June 2023. Prepare a journal entry to recognise the current tax liability/tax loss.
Calculate deferred tax asset and deferred tax liability balances as at 30 June 2023. Prepare the deferred tax journal entries for the year ended 30 June 2023. Note that you are NOT required to prepare journals to offset the deferred tax asset and deferred tax liability balances. Show your calculation using deferred tax worksheets by creating separate columns for: carrying amount, tax base, taxable temporary differences and deductible temporary differences
Assume that by 1 December 2023 there was a change in tax rate to: With reference to AASB112 Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax liability balances as at 1 December 2023 following a lower tax threshold for the 2023-2024 financial year. [Prepare the journal entries to record the effect of change in tax rate.
27.50%
