ShouldBeMyOwnWork Ltd had the following balances in their books showing Carrying Amount and Tax Base amounts at 30 June 2018 which creates temporary differences:
Asset or Liability Carrying Amount
($’000) Tax Base
Computers at cost 300 300
Accumulated depreciation (60) (100)
Computers, net 240 200
Accounts receivable 100 100
Allowance for doubtful debts (10) 0
Accounts receivable, net 90 100
Provision for warranty costs 30 0
Provision for employee benefits (LSL) 20 0
The following information is available for the following year, the year ending 30 June 2019.
Statement of profit or loss and other comprehensive income for ShouldBeMyOwnWork Ltd for the year ending 30 June 2019
Cost of goods sold expense (1,800)
Depreciation expense (60)
Warranty expense (90)
Bad and doubtful debts expense (25)
Other expenses (1,375)
Profit before tax
Other comprehensive income 650
ShouldBeMyOwnWork Ltd depreciates computers over five years in its accounting records, but over three years for tax purposes. The straight-line method is used. During the year, ShouldBeMyOwnWork Ltd wrote off bad debts amounting to $15,000. Warranty costs of $70,000 were paid during the year. No amounts were paid for long-service leave during the year.
The following information is extracted from the statement of financial position at 30 June 2019:
Accounts Receivable 120
Allowance for doubtful debts (20)
Provision for warranty costs 50
Provision for employee benefits (LSL) 30
There was no acquisition of plant and equipment during the year.
The tax rate as at 30 June 2018 and 30 June 2019 was 30 per cent
a) Calculate the amount of each of ShouldBeMyOwnWork Ltd’s temporary differences, if any, at 30 June 2018, and state whether it is deductible or taxable
b) What is the balance of the deferred tax liability and deferred tax asset, if any, as at 30 June 2018?
c) Calculate ShouldBeMyOwnWork Ltd’s taxable income for the year ending 30 June 2019. d) Prepare journal entries to record current tax and deferred tax for the year ending 30 June 2019.