Question

Question 1
The following data are taken from the trial balance of Bula Island Limited on 30 June 2018 with selected comparative information provided for 30 June 2017.
2018
2017
Sales revenue
9,245,000
Interest revenue
850,000
Royalties revenue
1,450,000
Dividend revenue
150,000
Depreciation-building
147,500
Depreciation-plant
262,500
Depreciation-equipment
75,000
Research and development expenditure
1,650,000
Cost of goods sold
4,005,000
Warranty expense
195,000
Wages and salaries expense
3,475,000
Long service leave expense
235,000
Interest expense
305,000
Rates and taxes on property
145,500
Doubtful debts expense
142,500
Accounts receivable
675,000
375,000
Estimated uncollectible debts
182,000
95,000
Interest receivable
300,000
275,000
Royalties receivable
920,000
745,000
Land (at cost)
2,500,000
2,500,000
Buildings
3,200,000
3,200,000
Accumulated depreciation-buildings
442,500
295,000
Plant
2,100,000
2,100,000
Accumulated depreciation-Plant
787,500
525,000
Equipment
750,000
750,000
Accumulated depreciation-equipment
225,000
150,000
Wages and salaries payable
345,000
265,000
Provision for long service leave
355,000
245,000
Provision for warranty claims
130,000
115,000
Interest payable
100,000
100,000
Additional Information
1. All depreciable assets were acquired on 1 July 2015. For financial reporting purposes, depreciation is recognised on a straight line basis, over 20 years for buildings (estimated residual value $250,000), eight years for plant and 10 years for equipment. For tax purposes, straight line depreciation is applied over 40, 10 and eight years respectively.
2. After reviewing all relevant information, the directors determined that, at 30 June 2018, the plant was impaired by $250,000 (this is not reflected in the amounts presented in the trial balance).
3. On 30 June 2018, after careful consideration, the directors of Bula Island Ltd decided to adopt the fair value model for land; the fair value of land on 1 July 2017 was $3,500,000 and on 30 June 2018 was $3,250,000.
4. The research and development expenditure qualifies for the additional 25% taxation deduction.
5. The tax rate at 30 June 2017 was 30%. On 15 June 2018, legislation was enacted decreasing the tax rate to 25% effective 1 July 2018.
Required:
1. Calculate the amount of current tax expense. Use an appropriately labelled table for this task.
2. Prepare a deferred tax worksheet to calculate the amounts for deferred tax assets and deferred tax liabilities for the reporting period 30 June 2018. Use an appropriately labelled table for this task.
3. Prepare journal entries for the income tax expense related items for the reporting period 30 June 2018.

Answer 1

- Answer Page No o 0 Currents campo de Particular Amounts Total rievenue $ 11,695,000 Total expenses ($ 10,638,000) Earnings bebore bar ( FBT) $ 1057,000 Cevrent tax expense $317,100 Tobal vievenue - Sales revenue + interest revenue +Royalties revenue t dividend revenue = 9845000.+ 850,000 + 1450,000 + 150,000 = $11695,000 Tot cel oupenses = 144500 + 262500 + 75000 + 1650,000 + 4005000 + 195000 + 3475000 + 235000 +305000 + 145500. -7 142500 = $10638000 Current tax expense = = (11695000 – 10638000)* 30%, 1054000 X 30%, - = $ 314100

@ Debesured that the cooksheet for the period 2016118 Bageri no @ uuuu uuuu Particular tax I liability Accounting Taxation difference Debered asset) Depreciation on building 147500 73750 3450 18438 Anset Depreciation on plant 260500 210.000 52500 13125 Asset Depreciation on equipment 75000 93450 -18750 -4688 Liabilly Impairment of plant 250,000 o 250,000 62500 Anels Research & development 1650,000 2062500-412500-10 31Qs Liabilety L Net deferred tax -13750 Liability Difference - Accounting – taxation Debered fax assebliabilita" - Difference X25% depreciation on building toration = 144500 X 50%. = $73950 ckpreciation on plank daxation - 262500180 % - $ 210,000 Crepreciation on equipment tezation - 75000 X 125 % = $93450 Research & development taxation = 1650,000 X 105 % – $2062500 Tobal deferred tax asset a 18438 +13125 +62500 13. $ 94063

Page.no Total deberred tax asset = $94063] Total deberred dose liability 3 103125 +4688 = $107813 .: Total deberred das lobi ladang - $104813 Gredit Debit $314100 © Joconal entries Date . Poorticular 3016118 Current tax ale To sfatement of profit & las ale 3016118 Statement of profit & loms ale To deberenedl -fax ale (fiability) $314100 $13750 $13750