ACC2100 Study Guide - Final Guide: Accounts Receivable, Accrual, Deferred TaxPremium

11 pages23 viewsFall 2017

Department
Accounting
Course Code
ACC2100
Professor
Dr Dharmendra Naidu
Study Guide
Final

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Tutorial Questions:C h 6 RQ 2, 3, 4, 5 and PQ 6.2, 6.10 (a), 6.13 (a)
Question 6.2 LO 4, 5 Current tax liability in four cases
The chief financial officer of Lost Weekend Ltd has asked you to calculate the taxable
income and prepare the journal entry for the current tax liability in each of the following
four cases.
Case 1
Lost Weekend LTD
Current Tax worksheet
For the year ended (..)
Accounting profit (before tax) $ 40 000
Add:
Goodwill impairment loss 6 000
Entertainment costs -
Donation to political party 1 000
Depreciation Expense Plant 4 000
Long-service leave expense 600 $ 51 600
Deduct:
Tax depreciation for plant 8 000
Long-service leave paid - $ (8 000)
Taxable income $ 43 600
Current tax liability @ 30% 13 080
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Journal entries:
Income tax expense 13 080
Current tax liability 13 080
(Recognition of current tax liability, based on the current taxable
income for the year)
Case 2
Lost Weekend LTD
Current Tax worksheet
For the year ended (..)
Accounting profit (before tax) $ 20 000
Add:
Goodwill impairment loss -
Entertainment costs 6 000
Donation to political party 3 000
Depreciation Expense Plant 2 000
Long-service leave expense 600 $ 31 600
Deduct:
Tax depreciation for plant 4 000
Long-service leave paid - $ (4 000)
Taxable income $ 27 600
Current tax liability @ 30% 8 280
Journal entries:
Income tax expense 8 280
Current tax liability 8 280
Case 3
Lost Weekend LTD
Current Tax worksheet
For the year ended (..)
Accounting profit (before tax) $ 5 000
Add:
Goodwill impairment loss -
Entertainment costs 7 000
Donation to political party -
Depreciation Expense Plant 10 000
Long-service leave expense 600 $ 22 600
Deduct:
Tax depreciation for plant 20 000
Long-service leave paid - $ (20 000)
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Taxable income $ 2 600
Current tax liability @ 30% 780
Journal entries:
Income tax expense 780
Current tax liability 780
Case 4
Lost Weekend LTD
Current Tax worksheet
For the year ended (..)
Accounting profit (before tax) $(10 000)
Add:
Goodwill impairment loss 8 000
Entertainment costs -
Donation to political party -
Depreciation Expense Plant 2 000
Long-service leave expense 1 200 $ 1 200
Deduct:
Tax depreciation for plant 4 000
Long-service leave paid 2 400 $ (6 400)
Taxable income $ (5 200)
Current tax liability @ 30% 0
Journal entries:
Income tax expense 1 440
Current tax liability 1 440
Deferred Tax Asset 1 560
Income Tax Income 1 560
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