Question

Bamboo is a Victorian-based company that sells kitchenware and homeware products. It started its business on 1 July 2018. The profit and loss statement for the year ended 30 June 2021 and the extract of the statements of financial position of Bamboo Ltd for the year ended 30 June 2020 and 30 June 2021 are provided below. The profit and loss statement reports a profit before tax of $120,1700 for the year ended 30 June 2021.        

 

The Profit and Loss   Statement for the year ended 30 June 2021
Revenue					1,554,500
Sales revenue		818,860
Service revenue(1)		660,240
Government grant(9)		75,400
Expenses
Administration expense(4)				45,000
Salaries expense(6)				68,000
Long service-leave				29,300
Interest expense(6)				32,800
Bad debt expense				10,200
Depreciation expenses – Equipment(2)				64,000
Depreciation expenses – Building(7)				50,000
Entertainment expense(8)				8,900
Impairment of goodwill(7)				9,600
Insurance expense(5)				35,000	352,800
Accounting profit before tax					1,201,700

 

 

The Statement of   Financial Position as at 30 June 2020 and 30 June 2021
			2021		2020
Assets
Cash			70,420		69,300
Inventory			42,400		52,000
Accounts receivable		62,000		75,000
Less allowance for doubtful debts		22,400	39,600	16,800	58,200
Prepaid insurance			5,250		4,350
Equipment – cost		320,000		320,000
Less accumulated depreciation		128,000	192,000	64,000	256,000
Buildings – cost(7)		400,000		400,000
Less accumulated depreciation		100,000	300,000	50,000	350,000
Land(3)			270,000		180,000
Goodwill(7)			18,400		28,000
Total Assets			938,070		997,850
(To   be continued on next page)

 

The Statement of   Financial Position as at 30 June 2020 and 30 June 2021 (continued)
Liabilities
Account payable			33,600		38,400
Accrued interests			30,300		33,900
Accrued salary			20,000		20,600
Service revenue received in advance(1)			9,600		7,200
Provision for long service leave			16,400		14,400
Loan payable			80,000		80,000
Total liabilities			189,900		194,500
Net Assets			748,170		803,350

                       

Additional Information:

1.     Unearned service revenue recognised during the year has amounted to $660240. Income is taxed when cash is received.

2.     The cost of the equipment is $320,000. Taxation office generally allows this type of asset to be depreciated over 4 years.

3.     Bamboo Ltd acquired a parcel of land at the cost of $180000 on 1 July, 2019. The land was revalued to its fair value of $270000 as at 30 June 2021.

4.     All administration expenses incurred for the year were fully paid at 30 June 2020 and 30 June 2021.

5.     Actual amount paid on insurance is allowable for deduction.

6.     Interest expenses and salaries expense are allowed for deduction only when they are paid.

7.     Impairment of goodwill and depreciation of building are not allowable for deduction.

8.     Entertainment expenses are non-allowable deduction under tax purpose.

9.     Government grant is an exempt income under tax purpose.

10.  Deferred tax asset and deferred tax liability balances for the year ended 30 June 2020 is amounted to $25,000 and 0, respectively.

11.  The tax rate was 30% for the year ended 30 June 2021.

Required

A.    Prepare a tax reconciliation to calculate current tax liability for the year ended 30 June 2021.

B.    Complete the Taxation Worksheet for the year ended 30 June 2021 in accordance with AASB 112: Income Taxes and prepare the applicable journal entry or entries to record tax expense, current tax liability, deferred tax liabilities, deferred tax assets and tax-effect for revaluation for the year ended 30 Jun 2021, including offsetting the deferred tax.