Acct 505 Week 1
Part A: Accounting for income tax
For journal entries, narration is NOT required.
The accounting profit before tax of Happy Star Ltd for the year ended 31 December 2012 amounted to $10,000 after including the following information.
The financial year of the company was from 1 January 2012 to 31 December 2012.
Equipment: The Company purchased the equipment for the amount of $100,000 on 1 January 2011. Ending balance of equipment based on accounting as at 31 December 2011 was $100,000. Ending balance as at 31 December 2012 was $100,000.
A deferred tax liability in relation to the equipment as at 31 December 2011 was $1,500.
Accumulated depreciation of equipment: Ending balance based on tax as at 31 December 2011 was $25,000. …show more content…
Ending balance as at 31 December 2012 was $4,000. A deferred tax liability in relation to prepaid rent as at 31 December 2011 was $3,000.
Income tax rate was 30 per cent.
There is no other difference between accounting profit and taxable income except the above information.
Other tax information: income tax rate was 30 per cent.
Required:
(i) Complete the tax worksheet to determine the balance of deferred tax asset (DTA) or deferred tax liability (DTL) as at 31 December 2011.
(ii) Determine taxable income and current tax liability for the financial year ended 31 December 2012. Prepare the journal entry to record the current tax liability.
(iii) Complete the tax worksheet to determine the balances of DTA or DTL as at 31 December 2012 and the change (movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012.
(iv) Prepare the journal entry to record the change (the movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012. (1 + 1 + 1 + 1 = 4 marks)
Simplified Tax
For journal entries, narration is NOT required.
The accounting profit before tax of Happy Star Ltd for the year ended 31 December 2012 amounted to $10,000 after including the following information.
The financial year of the company was from 1 January 2012 to 31 December 2012.
Equipment: The Company purchased the equipment for the amount of $100,000 on 1 January 2011. Ending balance of equipment based on accounting as at 31 December 2011 was $100,000. Ending balance as at 31 December 2012 was $100,000.
A deferred tax liability in relation to the equipment as at 31 December 2011 was $1,500.
Accumulated depreciation of equipment: Ending balance based on tax as at 31 December 2011 was $25,000. …show more content…
Ending balance as at 31 December 2012 was $4,000. A deferred tax liability in relation to prepaid rent as at 31 December 2011 was $3,000.
Income tax rate was 30 per cent.
There is no other difference between accounting profit and taxable income except the above information.
Other tax information: income tax rate was 30 per cent.
Required:
(i) Complete the tax worksheet to determine the balance of deferred tax asset (DTA) or deferred tax liability (DTL) as at 31 December 2011.
(ii) Determine taxable income and current tax liability for the financial year ended 31 December 2012. Prepare the journal entry to record the current tax liability.
(iii) Complete the tax worksheet to determine the balances of DTA or DTL as at 31 December 2012 and the change (movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012.
(iv) Prepare the journal entry to record the change (the movement/adjustment) in DTA or DTL for the financial year ended 31 December 2012. (1 + 1 + 1 + 1 = 4 marks)
Simplified Tax