Oranges Ltd’s profit before tax for the year ended 30 June 2023 was $1,350,000. The assets and liabilities at 30 June 2022 and 30 June 2023 were:
|Allowance for doubtful debts||(13,000)||(12,000)|
|Accumulated depreciation – buildings||(99,000)||(70,000)|
|Accumulated depreciation – equipment||(190,000)||(120,000)|
|Development expenditure – at cost||320,000||200,000|
|Accumulated amortisation – development expenditure||(144,000)||(80,000)|
|Deferred tax asset||?||29,600|
|Deferred tax liability||?||72,000|
|Provision for long service leave||36,000||28,000|
|Provision for warranty claims||32,000||34,000|
- The tax rate is 30%.
- A tax deduction for development costs of 125% of the amount spent during the year is available for tax purposes. The profit reflects the amount of development costs amortized in the current period.
- Revenue for the year include’s Non-taxable income of $138,000.
- Expenses brought to account included:
- Depreciation – buildings $29,000
- Depreciation – equipment $70,000
- Impairment – Goodwill (non-deductible) $30,000
- Amortisation – development expenditure $64,000
- Accumulated depreciation on equipment for tax purposes was $180,000 on 30 June 2022, and $285,000 on 30 June 2023.
- Bad debts of $14,000 were written off during the year, and warranty repairs to the value of $22,000 were carried out. There was no tax deduction for long service leave in the current year.
- Buildings are depreciated in the accounting records but no deduction is allowed for tax purposes.
- Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2023 (show all working).
- Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2023.
Include all accounts and net balances where appropriate.
- Prepare the journal entries to recognize the current tax liability, deferred tax assets, and liabilities on 30 June 2023.