Question

QUESTION 1 (30 MARKS) A) The following data applies to the two unrelated companies Lloyd Bhd and Cole Bhd: - Lloyd Bhd Cole Bhd RM RM Profit before tax for the year to 30 June 2017 1,300,000 136,000 Taxable income for the year to 30 June 2017 340,000 150,000 Deferred tax liability 1 July 2016 90,000 Deferred tax asset 1 July 2016 15,000 Taxable temporary differences at 30 June 2017 960,000 306,000 Deductible temporary differences at 30 June 2017 70,000 All taxable and deductible temporary differences relate to the profit or loss. Assume a corporate tax rate of 30%. Required: a) Prepare the journal entries to record the current and deferred tax for 30 June 2017 for each company. (10 marks)

Answer 1

a)

	Llyod Bhd RM		Cole Bhd RM
	Debit	Credit	Debit	Credit
Deferred Tax Expense	2,88,000		91,800
Deferred Tax Credit		-		21,000
Deferred Tax Liability		2,88,000		91,800
Deferred Tax Asset	-		21,000
Current Tax	1,02,000		45,000
Current Tax Payable		1,02,000		45,000
	3,90,000	3,90,000	1,57,800	1,57,800

Working

Particulars	Llyod Bhd RM	Cole Bhd RM
Profit before tax for the year to 30 June 2017 (A)	13,00,000	1,36,000
Taxable income for the year to 30 June 2017 (B)	3,40,000	1,50,000
Corporate tax rate (Ç)	30%	30%
Current Tax - B*C	1,02,000	45,000
Taxable Temporary difference (D)	9,60,000	3,06,000
Deferred tax expense - D*C	2,88,000	91,800
Deductible temporary difference (É)	-	70,000
Deferred tax credit - E*C	-	21,000