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ACT503 Corporate Accounting

Published : 05-Oct,2021  |  Views : 10

Question:

ShouldBeMyOwnWork Ltd had the following balances in their books showing Carrying Amount and Tax Base amounts at 30 June 2018 which creates temporary differences: 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:
Carrying Amount Tax Base
Asset or Liability ($'000) ($'000)
Computers at cost 300 300
Accumulated depreciation (60) (100)
Computers, net 240 200
Accounts receivable 100 100
Allowance for doubful 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 ($'000)
Revenue 4,000
Cost of goods sold expense (1,800)
Depreciation expense (60)
Warranty expense (90)
Bad and doubtful debts expense (25)
Other expenses (1,375)
Profit before tax 650 Other comprehensive income Nil
($'000)
Assets
Accounts Receivable 120
Allowance for doubful debts (20)
Liabilities
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
Required:
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.

In accounting for employee benefits wherein under their contract with employers, employees can receive various forms of benefits in return for their services. Such benefits will usually result to recognition of expenses by the employer, and if not paid as at the end of the reporting period, becomes liabilities from the perspective of the employer.If the services of the employees are used to generate items that are expected to provide future economic benefits -- for example, employees generate Inventories in the form of WIP (work in progress) -- then amounts paid or payable to employees may be considered to be part of the cost of the respective assets.
Required: Aside from the above-mentioned Inventories, illustrate or describe other scenarios you can think of when would payments made to employees can be considered to be an Asset Provide possible journal entries, if needed.

Answer:

Particulars ChallengeMe Pty. Ltd. TakeItEasy Ltd. Group
Profit after Tax $4,00,000  $1,90,000  $4,75,100 
Interim Dividend ($90,000) ($40,000) ($90,000)
Final Dividend ($1,10,000) ($50,000) ($1,10,000)
Retained Earnings - 30 June,2019 $5,00,000  $3,00,000  $5,75,100 
Share Capital $10,00,000  $5,00,000  $10,00,000 
Total Shareholders' equity $15,00,000  $8,00,000  $15,94,100 
Accounts Payable $1,00,000  $10,000  $1,10,000 
Dividends Payable $1,00,000  $50,000  $1,00,000 
Loan $6,70,000  $1,40,000  $8,10,000 
Total Liabilities & equity $23,70,000  $10,00,000  $26,60,000 
Cash $80,000  $40,000  $1,20,000 
Accounts Receivable $50,000  $50,000  $50,000 
Inventory $1,40,000  $1,23,000  $2,63,000 
Land $6,00,000  $4,00,000  $10,00,000 
Property,Plant & Equipment $9,00,000  $7,00,000  $15,00,000 
Accumulated Depreciation ($3,00,000) ($3,13,000) ($3,60,000)
Total Assets $23,70,000  $10,00,000  $26,60,000 
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