HA3011Past Exam2 1320 x 169084dt Past20Exam273201 7 pdf Que

HA3011,Past Exam2 13,20 x 169084-dt , Past%20Exam,2.73,201 7 pdf Question 3 (14 marks) H&Y; Ltd purchased a machine on 1 July 2014 at a cost of $320,000. The machine is expected to have a useful life of 4 years (straight line basis) and no residual value. For taxation purposes the ATO allows the company to depreciate the asset over 5 years. The profit before tax for the company for the year ending 30 June 2015 is $500,000. The tax rate is 30%. Required: a) Calculate the company\'s taxable profit and hence its tax payable for 2015. (4 marks) b) Determine the deferred tax liability or deferred tax asset that will result. (4 marks) c) Prepare the necessary journal entries at 30 June 2015. (3 marks) d) List examples of temporary differences that create a deferred tax asset and a deferred tax liability (each with one example). (3 marks) 9 0

Solution

a) Statement for Tax calculation

Profit before tax =$500,000

Depreciation of machine(320,000/4years(life)) = 80,000

Tax allowable Depreciation Year1 (W1)    =(19,200)

Taxable Amount $560,800

Tax liabitilty @30% (560,800*0.3) =168,240

W1) Tax allowable depreciation

b) Depreciation For accounting Profit = 80,000

tax allowable depreciation =(19,200)

Temporary Difference- asset/(liability) 60800

tax rate @30% Defered Tax Asset 18240

c) Dr:Income tax expense -168,240

Cr: Deferred Tax Asset -18,240

Cr:income tax payable -150,000

,,,,,,,

Dr: Depreciation -80,000

Cr:Accumulated Depreciation -80,000

d) Example for Deferred Tax Liabiltity And Defered tax Asset

Note: how Temporary difference araisen? Because Tax allowable depreciation(capital allowance from tax authority) and accounting depreciation(from life of asset) are different.

-Any overpaid Tax will be returned to the company as tax relief.

years	Written Down VALUE	tax rate	Tax allowance
1	Cost of 320,000
	(320,000/5years(tax purpose)=64,000	*30%	19200
2	(320,000-64000)=256000
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