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QUESTION 2020 Marks) From the following information relating to Swintopia Ltd at June 30, 2022 prepare all the necessary entries for tax effect accounting: Swintopia reported a net profit before income tax of $870,000 for the year. The net profit was determined after charging the following items : . Entertainment expenses $5,000 Depreciation on Buildings $15,000 Allowance for doubtful debts $9,000 Increase in the provision for Annual leave Depreciation on Vehicles $20,000 Goodwill impairment $15,000 $12,000 An extract of the Statement of Financial Position as at June 30, 2022 for accounting and tax purposes appears as follows: Carrying Amt Tax Basel Assets Cash at Bank Accounts Receivable Buildings 550,000 Less accumulated depreciation - 15,000 Motor Vehicles 90,000 Less accumulated depreciation 20,000 85,000 85,000 63,000 68,000 550,000 535,000 0 550,000 90,000 70,000 25,000 65,000 753,000 768,000 Liabilities Accounts payable Provision for Annual leave Motor Vehicle Lease 35,000 4,000 45,000 84,000 35,000 45,000 80,000 Net Assets 669,000 688,000 Additional Information: . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) An extract of the Statement of Financial Position as at June 30, 2022 for accounting and tax purposes appears as follows: Carrying Amt Tax Base Assets Cash at Bank Accounts Receivable Buildings 550,000 Less accumulated depreciation - 15,000 Motor Vehicles 90,000 Less accumulated depreciation 20,000 85,000 85,000 63,000 68,000 550,000 535,000 0 550,000 90,000 70,000 25,000 65,000 753,000 768,000 35,000 Liabilities Accounts payable Provision for Annual leave Motor Vehicle Lease 35,000 4,000 45,000 84,000 45,000 80,000 Net Assets 669,000 688,000 Additional Information: . Depreciation on buildings is to be regarded as a permanent difference Depreciation on Motor vehicles for taxation purposes is $25,000 Entertainment expenses are not an allowable deduction; A bad debt of $4,000 from the previous financial year has been written off and can now be claimed as a tax deduction.(this is written off against the provision) Annual leave paid during the year was $8,000 The rate of income tax is 30% Required: 1. Prepare a schedule to calculate taxable income 2. Calculate: a. Taxable temporary differences b. Deductible temporary differences 3. Prepare the journal entries to account for income tax expense in accordance with AASB112, recording: - a. Income tax expense b. Deferred Tax asset c. Deferred Tax liability d. Any other relevant journals. 4. Prepare a statement reconciling pre-tax profit to taxable income 1. Schedule to calculate taxable income (5 marks ) Accounting Profit before tax - taxable income $$ add non-deductible expenses less allowable deductions Taxable Income 2. Calculate temporary differences (3 marks ) Temporary Differences Temporary Differences Carrying Amt Tax Base Assets CA - TB TB - CA TTD DTD Liabilities TB - CACA - TB Net Assets 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DATE DETAILS DR CR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) 3. GENERAL JOURNAL OF Swintopia LTD (4 marks ) DATE DETAILS DRCR 30/6/2022 4. Reconciliation of pre-tax profit to taxable income (4 marks ) Reconciliation +/- permanent differences . +/- temporary differences Taxable Income 5a . What is the objective of Accounting standard AASB112? (2 marks) 5b. Why is there a difference between accounting profit and taxable income ? (2 marks )

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