Problem
Innovation Ltd was established on 1 July 2019 with share capital totalling $264,000.
One year later at 30 June 2022 the trial balance of the company was as follows:
|
Account
|
Debit
|
Credit
|
|
Cash
|
48,000
|
|
|
Accounts receivable
|
75,000
|
|
|
Allowance for doubtful debts
|
|
400
|
|
Interest receivable
|
200
|
|
|
Inventory
|
40,000
|
|
|
Prepaid insurance
|
600
|
|
|
Machinery (at cost)
|
158,000
|
|
|
Accumulated depreciation - Machinery
|
|
11,800
|
|
Vehicles
|
22,000
|
|
|
Accumulated depreciation - Vehicles
|
|
200
|
|
Accounts payable
|
|
30,000
|
|
Rent payable
|
|
12,000
|
|
Provision for annual leave
|
|
3,600
|
|
Provision for services warranties
|
|
1,200
|
|
Share capital
|
|
264,000
|
|
Sales revenue
|
|
1,160,700
|
|
Interest revenue
|
|
500
|
|
Dividend revenue
|
|
600
|
|
Capital profit on sale of land
|
|
1400
|
|
Cost of sales
|
350,000
|
|
|
Depreciation
|
12,000
|
|
|
Salaries & wages
|
240,000
|
|
|
Annual leave
|
3,600
|
|
|
Rent
|
144,000
|
|
|
Insurance
|
2,400
|
|
|
Entertainment
|
800
|
|
|
Warranty expense
|
1,200
|
|
|
Doubtful debts
|
400
|
|
|
Other expenses
|
388,200
|
|
|
TOTAL
|
1,486,400
|
1,487,000
|
Additional information:
A. For tax purposes, depreciation on machinery is $28,000 and for vehicles $600; for the year ended 30 June 2020.
B. Doubtful debts, annual leave and service warranties are expensed in the year ending 30 June 2020 but are not tax deductible for tax purposes until paid.
C. Innovation Ltd has accrued annual leave entitlements of $3,600 in calculating net profit for the year ended 30 June 2020.
D. Service warranty expense is only deductible as a tax deduction when claimed by customers.
E. The company accrues doubtful debts expense as soon as it appears on a customer's account as uncollectible. However, the bad debt is not allowable as a tax deduction until all avenues to collect the account have been exhausted.
F. The tax rate is 30% and taxable income is $159,000.
Task
Complete a deferred tax worksheet.