Question 1 Brand enterprises Pty Ltd provides the following data for the financi

Question

Question 1 Brand enterprises Pty Ltd provides the following data for the financial year 30 June 2013: Net Profit before tax Brand enterprises Pty Ltd purchased a Motor Vehicle on 1 July 2012 at a cost of $220 000. The Motor is expected to have a useful life of 5 years (straight line basis) and no residual value. For taxation purposes, the ATO allows the company to depreciate the asset over 6 years 234 250 Calculate the company's taxable income for the year, and current tax payable (the tax rate is 30%) Determine the deferred tax liability or deferred tax expense Prepare the necessary journal entries

Explanation / Answer

Expected Depreciation as per Brand Enterprises (220000/5)

44000

Depreciation for Taxation Purpose (220000/6)

36667

Temporary Difference

7333

Taxable Income & Current Tax:-

Net Profit Before Tax

234250

(+) Temporary Difference in relation to Depreciation

7333

Taxable Income

241583

Current Tax (241583 * 30%)

72475

Deferred Tax Exp/Liab:-

Temporary Difference

7333

Deferred Tax Exp (Asset) (7333 * 30%)

2200

Journal Entries:-

Debit

Credit

Statement of Profit & Loss A/c

72475

Current Tax A/c

72475

Deferred Tax (Asset) A/c

2200

Statement of Profit & Loss A/c

2200

Expected Depreciation as per Brand Enterprises (220000/5)

44000

Depreciation for Taxation Purpose (220000/6)

36667

Temporary Difference

7333

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