The following information was extracted from the records of Jackson Ltd as at 30 June 2020. Carrying amount Tax base Asset (liability) Accounts receivable $175 000 125 000 $150 000 Motor vehicles 165 000 Provision for warranty Deposits received in advance (12 000) (15 000) The depreciation rates for accounting and taxation are 15% p.a. and 25% p.a. respectively. Deposits are taxable when received, and warranty costs are deductible when paid. An allowance for doubtful debts of $25 000 has been raised against accounts receivable for accounting pur- poses, but such debts are deductible only when written off as uncollectable. Calculate the temporary differences for Jackson Ltd as at 30 June 2020. Justify your classification of each difference as either a deductible temporary difference or a taxable temporary difference. Prepare a deferred tax worksheet and the journal entry to record deferred tax for the year ended 30 June 2020 assuming no deferred items had been raised in prior vears

The following information was extracted from the records of Jackson Ltd as at 30 June 2020. Carrying amount Tax base Asset (liability) Accounts receivable $175 000 125 000 $150 000 Motor vehicles 165 000 Provision for warranty Deposits received in advance (12 000) (15 000) The depreciation rates for accounting and taxation are 15% p.a. and 25% p.a. respectively. Deposits are taxable when received, and warranty costs are deductible when paid. An allowance for doubtful debts of $25 000 has been raised against accounts receivable for accounting pur- poses, but such debts are deductible only when written off as uncollectable. Calculate the temporary differences for Jackson Ltd as at 30 June 2020. Justify your classification of each difference as either a deductible temporary difference or a taxable temporary difference. Prepare a deferred tax worksheet and the journal entry to record deferred tax for the year ended 30 June 2020 assuming no deferred items had been raised in prior vears

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

The following information was extracted from the records of Jackson Ltd as at 30 June 2020.
Carrying amount
Tax base
Asset (liability)
Accounts receivable
$150 000
165 000
$175 000
Motor vehicles
125 000
Provision for warranty
Deposits received in advance
(12000)
(15000)
The depreciation rates for accounting and taxation are 15% p.a. and 25% p.a. respectively.
Deposits are taxable when received, and warranty costs are deductible when paid. An allowance
for doubtful debts of $25 000 has been raised against accounts receivable for accounting pur-
poses, but such debts are deductible only when written off as uncollectable.
Calculate the temporary differences for Jackson Ltd as at 30 June 2020. Justify your classification
of each difference as either a deductible temporary difference or a taxable temporary difference.
Prepare a deferred tax worksheet and the journal entry to record deferred tax for the year
ended 30 June 2020 assuming no deferred items had been raised in prior years.

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