Module 3 Additional Questions

Past Exam Question The Statement of Profit or Loss for Bailey Ltd for the year ended 30 June 2012, resulted in a profit before tax of $225,000. This profit amount included the following revenues and expenses: Revenues and Expenses included in profit Rent Revenue 15,000 Government Grant received 5,000 Bad Debts Expense 30,000 Depreciation of PPE 25,000 Annual Leave Expense 20,000 Entertainment costs 9,000 The draft Statements of Financial Position for Bailey Ltd for the years ended 30 June 2011 and 2012 showed the following assets and liabilities: Assets Cash Inventory Accounts Receivable Allowance for Doubtful Debts Property, Plant and Equipment (PPE) Accumulated Depreciation - PPE Deferred Tax Asset Liabilities Accounts Payable Provision for Annual Leave Rent Received in Advance Deferred Tax Liability 2012 40,000 85,000 250,000 (35,000) 300,000 (130,000) ? 2011 42,500 75,000 240,000 (15,000) 300,000 (105,000) 21,000

145,000 27,500 15,000 ?

130,000 15,000 10,000 19,500

Additional information: a) The government grant revenue is not assessable for tax purposes. Entertainment costs are not an allowable tax deduction. b) Accumulated depreciation of property, plant and equipment (PPE) for tax purposes was $150,000 at 30 June 2011, and depreciation for tax purposes for the year ended 30 June 2012 was $50,000. c) Assume a tax rate of 30% for the year ended 30 June 2012. Required: A. Complete the attached worksheet to calculate taxable income and the current tax liability for Bailey Ltd as at 30 June 2012, and prepare the appropriate journal entry for the endof-period current tax adjustment. B. Complete the attached worksheet to calculate the end-of-period adjustments to the deferred tax asset and deferred tax liability accounts as at 30 June 2012, and show the appropriate journal entry to record these adjustments.

Additional Questions Using the attached templates, students can complete the following two questions for additional practice. o Question 6.5 o Question 6.10 (templates provided on following pages)

Template for Question 6.5

TAMBORINE LTD Determination of Taxable Income (for the year ended 30 June 2014)

Accounting profit (loss) before income tax Add:

Deduct:

Taxable Income (Tax Loss) Current tax liability @ 30%

Template for Question 6.10

WELLINGTON LTD Calculation of deferred tax as at 30 June 2013 DTL Taxable Temp.Diff. DTA Deductible Temp.Diff.

Carrying Amount Assets Cash Receivables (net) Prepaid Insurance Plant (net) Goodwill Liabilities A/cs Payable Revenue in Advance Annual Leave Payable Temporary Differences Excluded Differences Net Temporary Differences Deferred tax liability Deferred tax asset Beginning balances Movement during year (tax losses recouped) Adjustment

Taxable Amount

Deductible Amount

Tax Base