Question

ques 3

Question 3 Tiger is a cleaning and packaging supplies company. It started its business on 1 July 2015. The income statement for the year ended 30 June 2019 and the extract of the statements of financial position of Tiger Ltd for the year ended 30 June 2019 and 30 June 2020 are provided below. The income statement reports a profit before tax of $1,174,955 for the year ended 30 June 2020. 1,635,900 The Income Statement for the year ended 30 June 2020 Revenue Sales Revenue 1,505,800 Service Revenue 101,340 Government Grant 28,760 Expenses Administration expenses 45,180 Wages 84,600 Long service-leave 84,252 Interest Expense 59,124 Bad debt expense 15,168 Depreciation expenses - Equipment 81,250 Depreciation expenses - Building 40,000 Entertainment Expense 7,646 Impairment of goodwill 13,569 Insurance expense 30,156 Accounting profit before tax 460,945 1,174,955 The Statement of Financial Position as at 30 June 2019 and 30 June 2020 2020 2019 Assets Cash 48,750 71,500 Inventory 54,250 57,750 Accounts Receivable 65,800 79,500 Less allowance for doubtful debts 32,000 33,800 26,800 52,700 Prepaid Insurance 4,850 3,553 Equipment -cost 650,000 650,000 Less accumulated depreciation 243,750 406,250 162,500 485,500 Building - cost 400,000 400,000 Less accumulated depreciation 200,000 200,000 160,000 240,000 Land 458,000 325,000 Goodwill 4,588 18,360 Total Assets 1.210.488 1.256,363

Answer 1

Q3.

		$
Accounting profit before tax		1174955
Add:
Depreciation of equipment		81250
Depreciation of buildings		40000
Impairment of goodwill		13569
Entertainment expenses		7646
Wages		0
Administration expenses		0
Insurance expenses		0
Bad debts		0
Long service leave		0
Less:
Tax depreciation	W1	130000
Trading profit before tax		1187420
Less:
Government grant		28760
Service Revenue		101340
Taxable income for the year		1057320
Income tax payable for the current year @ 30%	W2	317196
Less deferred tax asset b/f		34500
Total current tax liability for the current year		282696

Working note 1:

Depreciation= Cost of equipment- salvage value/ life of the asset

=650000/5 = 130000

Notes-

• Add back accounting depreciation and deduct tax depreciation
• Unearned service revenue should be shown as a current liability in the balance sheet

Working note 2:

Income tax payable:

1057320 * 30% = 317196