Complete a deferred tax worksheet. Complete the general journal entry to account for income tax.

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You are required to submit your assignment as a word file using 1.5 line spacing, size 12, Times New Roman font.

 

You can use excel for tables/workings/statements however these then need to be inserted into your Word document as a picture:

  1. select the section of text cells you want to copy from excel, click Ctrl + C (to copy the section)
  2. go to your word document and right click your mouse button, under paste Options go to the 4th icon (Picture U) and click on it
  • This will insert your excel section

 

Please find the instructions for Part 2 of the assignment over the page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Simpson Ltd was established on 1 July 2019 with share capital totalling $132,000.

 

One year later at 30 June 2020 the trial balance of the company was as follows:

 

AccountDebitCredit
Cash24,000 
Accounts receivable37,500 
Allowance for doubtful debts 200
Interest receivable100 
Inventory20,000 
Prepaid insurance300 
Machinery (at cost)79,000 
Accumulated depreciation – Machinery 5,900
Vehicles11,000 
Accumulated depreciation – Vehicles 100
Goodwill45,000 
Accumulated impairment loss 300
Investments25,000 
Accounts payable 15,000
Rent payable 6,000
Provision for annual leave 1,800
Provision for services warranties 600
Share capital 132,000
Sales revenue 650,000
Interest revenue 500
Dividend revenue 300
Exempt income 400
Capital profit on sale of land 700
Cost of sales175,000 
Depreciation6,000 
Goodwill impairment loss300 
Salaries & wages120,000 
Annual leave1,800 
Rent72,000 
Insurance1,200 
Entertainment400 
Fines and penalties100 
Fringe benefits tax200 
Warranty expense600 
Doubtful debts200 
Other expenses194,100
TOTAL813,800813,800

 

 

Additional information:

  1. For tax purposes, depreciation on machinery is $14,000 and for vehicles $300, for the year ended 30 June 2020.
  2. Doubtful debts, annual leave and service warranties are expensed in the year ending 30 June 2020 but are not tax deductible for tax purposes until paid.
  3. Simpson Ltd has accrued annual leave entitlements of $1,800 in calculating net profit for the year ended 30 June 2020.
  4. Service warranty expense is only deductible as a tax deduction when claimed by customers.
  5. The company accrues doubtful debts expense as soon as it appears on a customer’s account as uncollectible. However, the bad debt is not allowable as a tax deduction until all avenues to collect the account have been exhausted.
  6. The tax rate is 30% and taxable income is $79,500.

 

Required:

  1. Complete a deferred tax worksheet.
  2. Complete the general journal entry to account for income tax.
  3. Complete a statement of comprehensive income for the year ended 30 June 2020 (follow format in textbook on page 650 – 9th edition, showing one year only).
  4. Prepare a balance sheet at 30 June 2020 (follow format in textbook on page 181 – 9th edition, showing one year only).
  5. Discuss whether you think the deferred tax assets and liabilities are assets and liabilities in relation to the definitions contained in the conceptual framework (reference your written work to support your arguments). Maximum 300 words.