ACT503: Corporate Accounting Bill Ltd Profit Before Income Tax - Accounting and Finance Assignment Help

Assignment Task:

Task:

QUESTION 1 (25 marks)
Bill Ltd profit before income tax for the year ended 30 June 2021 is $500,000 including the following expenses
Depriciation of plant $35,000
Impairment of Goodwill 13,000
Long-service leave 30,000
Holiday pay 20,000
Doubtful debts 55,000
Entertainment Costs 15,000
Depreciation of buildings 5,000
The statements of financial position of the company at 30 June 2020 and 2021 showed the following information:

2020 2021

Assets
Cash $73,000 $82,000
Inventory 127,000 158,000
Receivables 430,000 585,000
Allowance for doubtful debts (20,000) (40,000)
Plant 350,000 350,000
Acc Depreciation- Plant (70,000) (105,000)
Buildings 100,000 100,000
Acc Depreciation- Buildings (25,000) (30,000)
Goodwill (net) 63,000 50,000
Deferred tax asset 28,000 ?

Requirement
1. Calculate the amount of current income tax expense, current tax liability, deferred income tax assets, and deffered income tax liability by using worksheets for the year ended 30 June 2021. (15 mark)
2. Prepare the balance day journal entries for income tax, including the change in the tax rate and the deffered tax asset and deferred tax liability accounts. (5 mark)
3. How will a change in the tax rate impact on the balances of deferred tax assets and deferred tax liabilities? Should any such change be reflected in the reported profit of the reporting entity when the tax rate changes? (5 mark)

QUESTION 2 (25 marks)
Sam Ltd enters into a 5 years lease non-cancellable agreement with West Ltd on 1st July 2020. The lease is for an item of truck that has a fair value of $476912 at the inception of the lease. Sam Ltd’s incremental borrowing rate is 9%

The truck is expected to have an economic life of 6 years, after which it will have an expected residual salvage value of $50,000. There is a purchase option that Sam Ltd will be able to exercise at the end of 5 year for $70,000. The rate of interest implicit in the lease is quoted as being 8%.

There are to be 5 annual payments of $120,000 being made at the end of each year along with an up- front payment of $30,000. The annual lease payment includes $20,000 representing payment to the lessor for the insurance and maintenance of the truck.

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