On the 30 June 2021 B Ltd had a balance of $198,000 in its deferred tax liability account and $76,000 in its deferred tax asset account. As of 30 June 2022, the taxable temporary totalled $720,000 and the deductible temporary differences totalled $330,000. Accounting profit before tax for the year ended 30 June 2022 was $900,000. This profit includes entertainment expense $200,000; government grants $30,000; accounting depreciation $7,500 (tax depreciation $5,500); warranty expense $2,000 (cash payment $1,000). Assume a current tax rate of 30%. differences Requirement: a) Calculate the current tax liability for the year ended 30 June 2022 and prepare the journal entry to record the current tax in the books. [Narrations are not required] b) Calculate the deferred tax liability and deferred tax asset on 30 June 2022 and prepare the journal entry to record the deferred tax amounts. [Narrations are not required]

On the 30 June 2021 B Ltd had a balance of $198,000 in its deferred tax liability account and $76,000 in its deferred tax asset account. As of 30 June 2022, the taxable temporary totalled $720,000 and the deductible temporary differences totalled $330,000. Accounting profit before tax for the year ended 30 June 2022 was $900,000. This profit includes entertainment expense $200,000; government grants $30,000; accounting depreciation $7,500 (tax depreciation $5,500); warranty expense $2,000 (cash payment $1,000). Assume a current tax rate of 30%. differences Requirement: a) Calculate the current tax liability for the year ended 30 June 2022 and prepare the journal entry to record the current tax in the books. [Narrations are not required] b) Calculate the deferred tax liability and deferred tax asset on 30 June 2022 and prepare the journal entry to record the deferred tax amounts. [Narrations are not required]

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

On the 30 June 2021 B Ltd had a balance of $198,000 in its deferred tax liability account and
$76,000 in its deferred tax asset account. As of 30 June 2022, the taxable temporary differences
totalled $720,000 and the deductible temporary differences totalled $330,000. Accounting profit
before tax for the year ended 30 June 2022 was $900,000. This profit includes entertainment expense
$200,000; government grants $30,000; accounting depreciation $7,500 (tax depreciation $5,500);
warranty expense $2,000 (cash payment $1,000). Assume a current tax rate of 30%.
Requirement:
a) Calculate the current tax liability for the year ended 30 June 2022 and prepare the journal entry to
record the current tax in the books. [Narrations are not required]
b) Calculate the deferred tax liability and deferred tax asset on 30 June 2022 and prepare the journal
entry to record the deferred tax amounts. [Narrations are not required]

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