MBS678: Corporate Accounting-Individual (or Pairs) Assignment Help
Question
MBS678: This corporate accounting assignment requires the student to carefully review the accounting details for the company Augusta Ltd which is provided to them, and address the corresponding questions. The questions demands the students to make the current tax, deferred tax worksheets, preparation of T accounts, and assess the influence of a tax rate change on the deferred tax assets and liabilities balance.
Solution
The solution incorporates a detailed analysis of the Augusta Ltd’s financial details, and answer of the four questions according to the same.
Question 1
The first question demands preparation of the current tax worksheet along with a journal entry depicting the current tax till 30 June 2023. Our experts have elaboratively analysed the accounting details for the organisation and prepared the worksheet, half of which you can read below.
Answer 1: The current tax worksheet and the journal entry
| Current tax worksheet as at 30 June 2023 | |||
| Accounting profit before tax | ______ | ||
| Add | |||
| Non-deductible entertainment expense | ______ | ||
| Depreciation expense-motor vehicle wrongly charged (18000-15750) | ______ | ||
| Carrying amount -Equipment (100000-45000) tax base | ______ | ||
| Rent revenue correctly added on cash basis | ______ | ||
| Doubtful debt expense wrongly expensed | ______ | ||
| Annual leave expense wrongly expensed | ______ | ||
| ______ | |||
| Less | |||
| Non-taxable royalty revenue | ______ | ||
| Carrying amount -Motor Vehicle (18000-18000) tax base | ______ | ||
| Carrying amount -Equipment (100000-60000) | ______ | ||
| Rent revenue wrongly added | ______ | ||
| Doubtful debt expense correctly expensed as written off during the year | ______ | ||
| Annual leave expense correctly expensed on cash basis | ______ | ||
| ______ | |||
| Taxable profit | ______ | ||
| Tax payable at 30% | ______ | ||
| Journal entry to recognize current tax | |||
| Date | Description | ______ | ______ |
| 30-06-2023 | Dr Income tax expense | ______ | |
| Cr Income tax payable | ______ | ||
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Question 2
The second question is about the worksheet depicting deferred tax worksheet, which our experts have presented in detail.
Answer 2. The deferred tax worksheet
| Deferred tax worksheet as at 30 June 2023 | (Amount in $) | (Amount in $) | (Amount in $) | (Amount in $) |
| Item | Carrying amount | Tax base | Taxable temporary difference | Deductible temporary difference |
| Assets | ||||
| Cash | ____________ | ____________ | ||
| Inventories | ____________ | ____________ | ||
| Carrying amount -Equipment (100000-45000) tax base | ____________ | ____________ | ____________ | |
| Rent revenue | ____________ | ____________ | ____________ | |
| Annual leave expense | ____________ | ____________ | ____________ | |
| Non-taxable royalty revenue | ____________ | ____________ | ____________ | |
| Liabilities | ||||
| Accounts payable | ____________ | ____________ | ||
| Carrying amount-Motor vehicle | ____________ | ____________ | ____________ | |
| Non-deductible entertainment expense | ____________ | ____________ | ____________ | |
| Doubtful debt expense wrongly expensed | ____________ | ____________ | ____________ | |
| ____________ | ____________ | |||
| Deferred tax liability @ 30% | ____________ | |||
| Deferred tax asset @30% | ____________ | |||
| Deferred tax liability (Opening balance) | ____________ | |||
| Deferred tax asset (Opening balance) | ____________ | |||
| Deferred tax liability (Closing balance) | ____________ | |||
| Deferred tax asset (Closing balance) | ____________ | |||
| Movements | ||||
| Journal entry to adjust deferred tax | ||||
| Date | Description | Dr | Cr | |
| 30-06-2023 | Dr Deferred Tax asset | ____________ | ||
| Deferred Tax liability | ||||
| Cr Income tax expense (deferred) | ____________ | |||
| Set-off will be allowed if conditions of Para 74, AASB 112 are fulfilled. These include a legally enforceable right of set-off for taxed levied by the same authority on the same entity |
This is only 50% of the deferred tax worksheet. Our experts can assist you with your corporate accounting assignment too. WhatsApp us at +447956859420.
Question 3
The next question requires the students to prepare T accounts for the receivable rent, doubtful debt allowance, and annual leave provision.
Answer 3. T accounts for the following three items: Rent receivable, Allowance for doubtful debts; Provision for annual leave.
| Allowance for doubtful debts | (Amount in $) | ||
| balance c/f | _________________________________________________________ | _________________ | balance b/f |
| Accounts receivable (bad debts written off) | _________________________________________________________ | _________________ | bad debt expense |
| _________________________________________________________ | _________________ | ||
| Provision for annual leave | |||
| balance c/f | _________________________________________________________ | _________________ | balance b/f |
| Cash expense | _________________________________________________________ | _________________ | leave expense |
| _________________________________________________________ | _________________ | ||
| Rent receivable | |||
| balance b/f | _________________________________________________________ | _________________ | balance c/f |
| rent income | _________________________________________________________ | _________________ | cash received |
| _________________________________________________________ | _________________ |
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Question 4
For the fourth question, our experts have explained the impact of a tax rate change on the balance between the deferred tax assets and liabilities. It also requires a description of whether a similar change should be presented in the profit reported in the reporting entity.
Answer 4.
A change in the tax rate will impact on the balances of deferred tax assets and deferred tax liabilities depending on whether the change has decreased or increased the tax rate. Where the tax rate has decreased from say 30% to 25%, the deferred tax balances must accordingly be reduced proportionately in the ratio of 25/30. The adjustments should then be made in the deferred tax asset and liability balances through the current income tax expense account. Where the tax rate has increased from say 30% to 40%, the deferred tax balances must accordingly be increased proportionately in the ratio of 40/30.
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