ACC322 - Company Income Tax - Financial Statement - Tax Effect Accounting - Accounting Assessment Answer

Assessment Task:

ACC322 Accounting Assessment Answer

Learning Outcomes

Upon successful completion of this subject, students should:

• be able to compute and account for company income tax;

• be able to prepare consolidated financial statements for economic entities where the parent has a 100% ownership interest in a subsidiary and where a non-controlling interest is involved;

• be able to account for foreign currency transactions;

• be able to translate the financial statements of an overseas controlled entity which have been denominated in a foreign currency; and

• be able to account for and prepare relevant financial report disclosures in relation to investments in associates and business combinations.

Assessment item 2

Task This assessment consists of 4 questions. A total of 300 marks are allocated to the questions below, which will then be converted to a mark out of.

Please note the following:

1) All workings, where appropriate, must be shown to substantiate your answers.

2) Solutions should be rounded to the nearest dollar.

3) To assist with the marking, narrations should be provided along with your journal entries.

Question 1 Tax effect accounting

Camberwell Services Ltd. had a before-tax profit as reported on its Statement of Comprehensive Income of $400,493 for the year ended 30 June 2019.

Additional Information:

a. Depreciation of buildings and entertainment expenses are not recognised tax deductions.

b. The start-up government grant is not treated as assessable income by the Australian Taxation Office.

c. Office supplies are claimed as a deduction when purchased. $15,000 of supplies were expensed (used) during the year.

d. Land, which had originally cost $650,000 was revalued in 2019.

e. Accumulated depreciation of the plant for tax purposes was $315,000 at 30 June 2018 and depreciation for tax purposes for the year ended 30 June 2019 amounted to $75,000.

f. Accumulated depreciation of motor vehicles for tax purposes was $46,200 at 30 June 2018 and depreciation for tax purposes for the year ended 30 June 2019 amounted to $33,000.

g. In the previous year, Camberwell Services Ltd made a tax loss of $29,630 and recognised a deferred tax asset in respect of this loss.

h. The company pays tax in quarterly instalments. The following payments were made during the year ended 30 June 2019:

•  28 July 2018 (final payment for 30 June 2018) $22,500
•  28 October (first payment for 30 June 2019) $31,420
•  28 February (second payment for 30 June 2019) $30,380
•  28 April (third payment for 30 June 2019) $31,750

i. the tax rate for the year ended 30 June 2019 was 30%, and no tax-related journal entries, other than for revaluation of land, have been recorded for the year ended 30 June 2019.

j. Assume the tax balances as at 30 June 2018 are correct.

Required:

1. Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2019 (show all working).  

2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2019. Include all accounts and net balances where appropriate. Show workings where required.

3. Prepare the journal entries to recognise the current tax liability, deferred tax assets, and liabilities at 30 June 2019. 

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