Question 4

Total Solutions Ltd commences operations on 1 July 2019. The draft statement of profit or loss and other comprehensive income, and statement of financial position for the year ended 30 June 2020 contained the following information:

Extract from statement of profit or loss and other comprehensive income for the year ended 30 June 2020

Assets and liabilities as disclosed in the statement of financial position as at 30 June 2020

Additional information:

 All administration and salary expenses incurred have been paid as at year end.

 Tax deductions for warranty and annual leave expenses are available only when the amounts are paid and not as they are accrued.

 Actual amounts paid for insurance are allowed as a tax deduction.

 Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.

 Interest revenue is taxed when amounts are received.

 The plant is depreciated over 20 years for accounting purposes, but over 10 years for taxation purposes.

 The tax rate is 30%.

Required:

i) Calculate the taxable income and current tax liability for the year ended 30 June 2020.

ii) Prepare a deferred tax worksheet to calculate the deferred tax asset and deferred tax liability balances and adjustments for the year ended 30 June 2020.

iii) Prepare the necessary journal entries to record the current tax liability, and deferred tax assets and deferred tax liabilities as at 30 June 2020.