Mulga Woods Ltd transports timber from forests to sawmills in central Victoria. The following is an extract of its financial statements:
Profit or Loss Account for the year ended 30 June 2015
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|
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$
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Gross profd from trading
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418
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500
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Interest income
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10
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600
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Less: Expenses
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Annual leave
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2
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400
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Borrowing costs
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1
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500
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Depreciation on vehicles
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2
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200
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Doubtful debts expense
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2
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200
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Insurance
|
14
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400
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Motor vehicle expense
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2
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300
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Rent on premises
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60
|
000
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Salaries and wages
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124
|
000
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Service warranty expenses
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2
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800
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Other expenses
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125
|
100
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336
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900
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Net Profit before income tax
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$92
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200
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Assets and liabilities included in the Statement of Financial Position for the last two years for Mulga Woods Ltd include:
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30 June 2015
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30 June 2014
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Assets
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Cash
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143
|
800
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139
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800
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Accounts receivable
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100
|
000
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75
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000
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Less provision for doubtful debts
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5
|
000
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95
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000
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4
|
000
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71
|
000
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Borrowing costs
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9
|
000
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-
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Less expense for year
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1
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500
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7
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500
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-
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Inventory
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45
|
000
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35
|
000
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Prepaid insurance
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1
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200
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600
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Accrued interest income
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2
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000
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-
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Deferred tax asset
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2
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640
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Motor vehicles
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22
|
000
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22
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000
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Less accumulated depreciation
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4
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400
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17
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600
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2
|
200
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19
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800
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Investments
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-
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50
|
000
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Liabilities
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Deferred tax liability
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?
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510
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Accounts payable
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66
|
000
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31
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200
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Provision for annual leave
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5
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200
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3
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600
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Provision for service warranties
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4
|
000
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1
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200
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Mortgage payable
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90
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940
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_
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50
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400
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The following items are treated differently for taxation purposes than for accounting purposes:
• Borrowing costs are fully deductible for tax purposes when paid.
• Annual leave is expensed during the year but is not deductible for tax purposes until paid.
• Service warranty expense is only allowable as a tax deduction when paid.
• The company accrues doubtful debts expense, however only the bad debt is allowable as a tax deduction when the bad debt is written off.
• The motor vehicle is depreciated on a straight-line basis. For the current year, the depreciation for tax purposes is $3 300. The tax base of the motor vehicle at 30 June 2014 was $18 700.
• Insurance actually paid is allowed as a tax deduction.
• Interest income is tax assessable only if it is received in cash.
• The company tax rate is 30%.
REQUIRED:
Submit your answer on the Question THREE Proforma For Mulga Woods Ltd:
(a) Calculate the taxable income and the current tax liability for financial year ended 30 June 2015.
(b) Prepare the journal entry to recognise current tax liability.
(c) Calculate the deferred tax asset and deferred tax liability balances as at 30 June 2015. Show your calculations using the deferred tax worksheet as provided in the proforma.
(d) Prepare the tax-effect journal entries for the year ended 30 June 2015.