Accounts: Tax Calculation, Deferred Tax Worksheet, Goodwill Treatment, Events After Accounting Period

This article covers tax calculation, current tax worksheet, deferred tax worksheet, goodwill treatment, events after accounting period, and their treatment according to AASB 112 and AASB 110.

Accounts

Table of Contents
QUESTION 1...................................................................................................................................3
1. Analyse the data given and provide the tax calculation for the values..............................3
2. Prepare the current tax worksheet and calculate the tax liability for the year 2042...........3
3. Prepare the deferred tax worksheet and calculate the movement in deferred tax for the year
2042........................................................................................................................................3
4. Give the journal entries which arise from the tax worksheets............................................4
5. Explain the item that have arise from the Journal entries which will be recorded in the
financial statements................................................................................................................4
Describe the treatment of Goodwill according to AASB 112................................................4
Question 2 .......................................................................................................................................5
1. Discussion related to Events after accounting period and whether the two issues are
considered adjusting or non-adjusting events. .......................................................................5
2. How will the first issue be treated in the business .............................................................5
3. How will the second issue be treated or what are the disclosure requirements of the same. .6
REFERENCES................................................................................................................................7

QUESTION 1
PART A
1. Analyse the data given and provide the tax calculation for the values.
According to current Tax worksheet the following calculations will be performed:
Depreciation Tax Expenses = 198000 * 10% = 19800
In deferred tax worksheet, the calculation of the tax base is the amount which is not included in
the tax expenses calculations.
Accounts receivable amounts subtracts the allowances of the doubtful debts.
= 273900 – 16500 = 257400
Then, the accumulated depreciation of machinery is deducted from the amount of machinery.
= 990000 – 396000 = 594000
2. Prepare the current tax worksheet and calculate the tax liability for the year 2042.
Particulars Amount
Accounting Profit 568000
Add: 334110
Doubtful Debt Expenses 13860
Depreciation Expenses 198000
Warranty Expenses 95700
Political donations Expense 15000
Interest Received 11550
Less: 164010
Depreciation tax Expenses 19800
Warranty paid 144210
Taxable Expenses 738100
Current tax Liability = Taxable Expenses * 30%
= 723100 * 30% = 221430

3. Prepare the deferred tax worksheet and calculate the movement in deferred tax for the year
2042.
Particulars Carrying Amount Tax Base Temporary Differences
Accounts Receivable 273900 257400 16500
Inventory 221430 221430 -
Machinery 990000 594000 396000
Workshop Supplies 7920 7920 -
Goodwill 290400 290400
TOTAL ASSETS 1783650 1371150 412500
Accounts Payable 238260 238260 -
TOTAL LIABILITIES 238260 238260 0
Temporary Differences 412500
Net Deferred Tax Liability = 412500 * 30% = 123750
Less: Opening Deferred tax liability = -4257
Deferred tax Expenses = 123750 – 4257 = 119493
4. Give the journal entries which arise from the tax worksheets.
Date Particulars Amount (Debit) Amount (Credit)
30/06/42 Income tax expenses
Current tax payable
221430
221430
30/06/42 Deferred Income tax expenses
Deferred tax payable
119493
119493
5. Explain the item that have arise from the Journal entries which will be recorded in the
financial statements.
Income Tax Expenses are the expenses which are recorded in the current liability side of
the balance sheet which are to be paid in the current year. It is the main sources of calculating the

deferred tax liability. It is recorded on the asset and liability side of the balance sheet based on
the adjustment. As in this case in will be recorded on the assets section.
PART B
Describe the treatment of Goodwill according to AASB 112.
According to the Australian Accounting Standard 112, goods is a not deductible expense
for the tax purpose. It recognises a deferred tax liability for the temporary difference which is
associated with the taxable expenses recognised in the business combination. It increases or
decreases the deferred tax asset liability of the firm (Miah and et. al., 2020). It will come under
the deferred tax worksheet under the head of assets. The temporary balance of the goodwill be
nil, as the whole amount will come under tax base.
Question 2
1. Discussion related to Events after accounting period and whether the two issues are considered
adjusting or non-adjusting events.
According to AASB 110, Events after the accounting period refers to those transactions
positive or negative that have been occurred after the end of an accounting and reporting period.
The accounts have already been authorised for issue by the directors of a business. These events
occur mainly in two ways. The events either adjusting or non-adjusting (Seve and Wilson, 2019).
Adjusting events refers to the occurrence that have happened after the preparation of
financial statements but before the issuance of same. These events provide evidence about a
transaction that have occurred at the end of reporting period. Non-adjusting events refers to those
events that actually indicate information about an occurrence that have been raised after the
reporting period.
The issue Huon Ltd shows that the business is required to pay bonuses to its executive
team in the April of 2042 with the amount of $1.8m, this transaction has been made after the
reporting period hence it is considered as an 'event after the accounting period'. The case also
mentions that the sub-committee has found that the bonus amount of the previous year have been
mentioned less. This will be followed by AASB 108 as these include the issue related to past
error that have been occurred in the financial statements of the Huon ltd. This is also an 'event
after the accounting period'.

The Bonuses paid after the financial year are considered as an adjusting event due to the
treatment which is required to be done into the financial statements after the reporting period.
The discovery of less bonuses paid in the previous year will be considered as a non-adjusting
event due to the ability to provide information about a past event.
2. How will the first issue be treated in the business
According to AASB 110, the event occurred after the reporting period will have two way
effect on the financial statements of Huon ltd. The first issues says that the business is providing
performance based bonuses to its senior executive team. These bonuses were paid to the team in
April 2024 with an amount of $1.8m. Bonuses refers to a financial compensation that is provided
to the employees who have worked exceptionally or to provide incentives to the workforce for
working efficiently and making the business achieve success (Pawsey, 2017). This bonus is
given from the profits earned by the business. Hence the treatment which is required to be done
according to AASB is that the amount of bonus will be added by $1.8m in the statement of
income of the company. This in turn will reduce the net profit of the business. The next effect
that will be done in the financial statements of the business is in the statement of financial
position of the business. In this the business will record this outstanding bonus payments under
the liabilities section of the statement of financial position. The current liabilities of the business
will be increased by $1.8m.
3. How will the second issue be treated or what are the disclosure requirements of the same.
In the second issue, the discovery is being made about the previous year's bonus payment
that these bonus payments have been paid incorrectly. The board while reviewing the bonuses of
last year found out that the bonus for the year 2041 have been wrongly entered. The correct
amount of the bonus for the year 2041 was a lot more than the one paid hence the business made
plans and approved for the business to be paid these short fall. The disclosure requirements of
this issue is that the management of the business has to provide the necessary details. These
details are, nature of the error which has been occurred, the amount which needs to be corrected
and with how much (Efrat, 2021). This correction should be made at the earliest of the period. A
restatement should be issued with the details of the error, the period in which it has occurred, the
conditions that have lead this error occur and the description about how and when these items
will be corrected. The financial statements of the future period does not require to pass any
adjustment entries to accommodate these disclosures

REFERENCES
Books and Journals
Efrat, Z., 2021. EOFY checklist. Company Director. 37(5). pp.58-62.
Miah, M.S. and et. al., 2020. Audit effort, materiality and audit fees: evidence from the adoption
of IFRS in Australia. Accounting Research Journal.
Pawsey, N.L., 2017, June. IFRS adoption: A costly change that keeps on costing. In Accounting
Forum (Vol. 41, No. 2, pp. 116-131). No longer published by Elsevier.
Seve, F. and Wilson, M., 2019. Direct and substitution effects of regulations impacting the scope
for classification shifting. Journal of Accounting and Public Policy. 38(3). pp.171-198.