On 1 July 2017, Bright Star Ltd was incorporated. The accounting profit and other relevant information of Bright Star for the two years to 2019 are as follows: 2019 2018 Profit before tax $4 500 000 $3 600 000 Warranty expense — 1500 000 Depreciation expense – machinery 60 000 60 000 Gain on sale of machinery for accounting — — Warranty paid 750 000 — Tax depreciation – machinery 90 000 90 000 Gain on sale of machinery for tax — —
On 1 July 2017, Bright Star Ltd was incorporated. The accounting profit and other relevant information of Bright Star for the two years to 2019 are as follows:
|
|
2019 |
2018 |
|
Profit before tax |
$4 500 000 |
$3 600 000 |
|
Warranty expense |
— |
1500 000 |
|
|
60 000 |
60 000 |
|
Gain on sale of machinery for accounting |
— |
— |
|
Warranty paid |
750 000 |
— |
|
Tax depreciation – machinery |
90 000 |
90 000 |
|
Gain on sale of machinery for tax |
— |
— |
|
Provision for warranty – carrying amount |
750 000 |
1500 000 |
|
Provision for warranty – tax base |
— |
— |
|
Machinery – carrying amount |
180 000 |
240 000 |
|
Machinery – tax base |
120 000 |
210 000 |
The company tax rate is 30%.
Required
- Calculate the current and
deferred tax of Bright Star Ltd for each year, 2018 and 2019
- Prepare the required tax
journal entries for each year.
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