Problem
Manta Ray Ltd reported a profit before tax for the year ened 30 June 2022 of $3,700,000. The company's statements of financial position include the following assets and liabilities:
2022 2021
Accounts receivable 245,000 200,000
Allowance for doubtful debts (10,000) (5,000)
Machinery - at cost 1,500,000 1,500,000
Accumulated depreciation (600,000) (450,000)
Provision for warranty 290,000 240,000
Deferred tax asset ? 73,500
Deferred tax liability ? 51,000
Additional information:
• Expenses included in the profit for the year ended 30 June 2022 are as follows: Entertainment expenses $70,000 Parking fines $110,000 Warranty expense $410,000 Doubtful debts expense $25,000.
• Accumulated depreciaton on the machinery for tax purposes was $740,000 on 30 June 2022 and $620,000 on 30 June 2021. There have been no acquisitions or disposals of machinery during the year.
• The corporate tax rate is 30%.
Task
i. Prepare the current tax worksheet for Manta Ray Ltd and the related tax journal entries for 30 June 2022. All workings should be clearly shown and justified with reference to the relevant accounting standards.
ii. Prepare the journal entries to adjust deferred tax accounts. All workings must be clearly shown and justified with reference to the relevant accounting standards.