Calculate E-Surfboards' taxable income for the year ended 30 June 2015

This document provides instructions and calculations for determining E-Surfboards' taxable income for the year ended 30 June 2015. It includes information on temporary differences, deferred tax liability and asset, and journal entries for recording current tax and deferred tax.

Module 6 Week 8
Assessment Type Written Examination
Unit Title: Prepare financial reports
for corporate entities
Student Declaration: I declare that this work has been
completed by me honestly and with integrity. I understand
that the Elite Education Vocation Institute’s Student
Assessment, Reassessment and Repeating Units of
Competency Guidelines apply to these assessment tasks.
Student Name:
Student Signature:
D
a
t
e
:
Assessment submission (new) requirements
Please save this file as PDF format (include your name to
the filename) before uploading onto Moodle.
Assessment/evidence gathering conditions
Each assessment component is recorded as either
Satisfactory (S) or Not Yet Satisfactory (NYS). A student can
only achieve competence when all assessment components
listed under procedures and specifications of the
assessment section are Satisfactory. Your trainer will give
you feedback after the completion of each assessment. A
student who is assessed as NYS is eligible for re-
assessment. Should the student fail to submit the
assessment, a result outcome of Did Not Submit (DNS) will
be recorded.
Principles of Assessment
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Based on Clauses 1.8 – 1.12 from the Australian Standards
Quality Assurance’s (ASQA) Standards for Registered
Training Organizations (RTO) 2015, the learner would be
assessed based on the following principles:
Fairness - (1) the individual learner’s needs are considered
in the assessment process, (2) where
appropriate, reasonable adjustments are applied
by the RTO to take into account the individual
leaner’s needs and, (3) the RTO informs the
leaner about the assessment process, and
provides the learner with the opportunity to
challenge the result of the assessment and be
reassessed if necessary.
Flexibility – assessment is flexible to the individual learner
by; (1) reflecting the learner’s needs, (2)
assessing competencies held by the learner no
matter how or where they have been acquired
and, (3) the unit of competency and associated
assessment requirements, and the individual.
Validity – (1) requires that assessment against the unit/s of
competency and the associated assessment
requirements covers the broad range of skills
and knowledge, (2) assessment of knowledge
and skills is integrated with their practical
application, (3) assessment to be based on
evidence that demonstrates tat a leaner could
demonstrate these skills and knowledge in other
similar situations and, (4) judgement of
competence is based on evidence of learner
performance that is aligned to the unit/s of
competency and associated assessment
requirements.
Reliability – evidence presented for assessment is
consistently interpreted and assessment results
are comparable irrespective of the assessor
conducting the assessment
Rules of Evidence
Validity – the assessor is assured that the learner has
the skills, knowledge and attributes, as
described in the module of unit of competency
and associated assessment requirements.
Sufficiency – the assessor is assured that the quality,
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evidence enables a judgement to be made of a
learner’s competency.
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presented for assessment is the learner’s own
work. This would mean that any form of
plagiarism or copying of other’s work may not
be permitted and would be deemed strictly as a
‘Not Yet Competent’ grading.
Currency – the assessor is assured that the assessment
evidence demonstrates current competency.
This requires the assessment evidence to be
from the present or the very recent past.
Resources required for this Assessment
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 All documents must be created using Microsoft
Office suites i.e., MS Word, Excel, PowerPoint
 Upon completion, submit the assessment via the
student learning management system to your trainer
along with the completed assessment coversheet.
 Refer the notes on eLearning to answer the tasks
 Any additional material will be provided by Trainer
Instructions for Students
Please read the following instructions carefully
 This assessment is to be completed according to the
instructions given by your assessor.
 Students are allowed to take this assessment home.
 Feedback on each task will be provided to enable you
to determine how your work could be improved. You will
be provided with feedback on your work within 2 weeks
of the assessment due date.
 Should you not answer the questions correctly, you will
be given feedback on the results and your gaps in
knowledge. You will be given another opportunity to
demonstrate your knowledge and skills to be deemed
competent for this unit of competency.
 If you are not sure about any aspect of this assessment,
please ask for clarification from your assessor.
 Please refer to the College re-assessment and re-
enrolment policy for more information.
At 30 June 2014, E-Surfboards Limited had the
following temporary differences:
Page 659
The following information is available for the
following year, the year ending 30 June 2015.
E-Surfboards Limited depreciates computers
over five years in its accounting records but
over three years for tax purposes. The straight-
line method is used. During the year E-
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Surfboards wrote off bad debts amounting to
$15 000. Warranty costs of $70 000 were paid
during the year. No amounts were paid for
long-service leave during the year. The
following information is extracted from the
statement of financial position at 30 June 2015:
There was no acquisition of plant and
equipment during the year.
The tax rate as at 30 June 2014 and 30 June
2015 was 30 per cent.
REQUIRED:
(a) Calculate the amount of each of
E-Surfboards' temporary
differences, if any, at 30 June 2014,
and state whether it is deductible or
taxable.
A temporary difference is the gap
between the carrying amount of an asset
or liability and its tax base. It can either
be deductible or taxable: Deductible: It is one which will yield
future amounts that can be deducted
while computing one's taxable income.
 Taxable: It is one which will yield future
taxable amounts while calculating one's
income eligible for taxation purposes.
In both cases, these differences are settled
once the carrying amount has been recovered
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relating to an asset or liability.
E-Surfboards Limited,Temporary
Differences as at 30 June, 2014 (Balance
Sheet)
Asset or
Liability
Carrying
Amount
($'000)
Tax Base
($'000)
Temporar
y
Differenc
e ($'000)
Computer
s at cost
300 300
Accumula
ted
Depreciati
on
60 100
Computer
s (net)
240 200 40
Accounts
Receivabl
e
100 100
Allowanc
e for
doubtful
debts
-10 0
Accounts
Receivabl
e (net)
90 100 -10
Provision
for
warranty
costs
30 0 30
Provision
for
employee
benefits
(LSL)
20 0 20
As per the above calculations, each E-
Surfboard includes Computers, Accounts
Receivable, Provision for Warranty Costs and
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Employee Benefits. The Temporary
Differences for:
Assets/
Liability
Temporary
Difference
Taxable/
Deductible
Computers 40 Taxable as
they will
generate
future
taxable
incomes
through
their usage.
Accounts
Receivable
10 It will be
deducted
from taxable
income.
Provisions
for warranty
costs
30 Deductible
Provisions
for
Employee
Benefits
20 Deductible
Apart from these, Depreciation expense given
in Profit and Loss Statement of Zebra will be
deductible as it will yield a future amount that
would reduce the future taxable incomes too.
(b)What is the balance of the
deferred tax liability and deferred
tax asset, if any, as at 30 June 2014?
Deferred Tax Liability, in terms of
temporary differences, relates to those
future incomes on which tax is
payable. On the other hand, Deferred
Tax Assets are those which include:
 Deductible Temporary Differences;
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 Carry Forward of Unused Tax Losses;
and
 Carry Forward of Unused Tax Credit.
Apart from this, Tax Base of an Asset or
Liability is one that will be deductible for
taxation purpose against any economic
benefit which will be derived by a business
enterprise once it is able to recover its
carrying amount. If economic benefits are not
taxable, carrying amount would be same as
the tax base of the asset or liability.
Deferred Tax Liability, in the context of
given scenario, shall be equal to the taxable
temporary differences which will be equal to
$40,000 for E-Surfboard. On the other hand,
Deferred Tax Assets would include
deductible temporary differences which
brings the total tax assets to $60,000
(=$10,000+$30,000+$20,000).
(c)Calculate E-Surfboards' taxable
income for the year ended 30 June
2015.
Taxable Income of E-Surfboards' for the
year ended June 30, 2015
Particulars Gross ($'
000)
Net ($'000)
Profit Before
Tax
650
Less:
Deductions
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Accounts
Receivable
-10
Provisions
for warranty
costs
-30
Provisions
for
Employee
Benefits
-20 -60
Taxable
Income
590
Less: Tax @
30%
-177
Income
After Tax
413
(d)Prepare journal entries to record
current tax and deferred tax for the
year ended 30 June 2015
Income tax expenses a/c 177
Deferred tax liability a/c 40000
To Income tax payable a/c 40177
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Assessment Submission Checklist to be completed by
the Trainer/Assessor
Unit name:
FNSACC504- Prepare
financial reports for
corporate entities
Did the student complete and provide evidence for the
following (please  ): Yes No
1. Access and accurately compile data and prepare reports
for corporate entities that comply with:
a. relevant accounting standards
b. statutory and other relevant requirements of
reporting bodies.
2. Identify and explain current business taxation
requirements
3. Identify and explain current financial legislation and
statutory requirements relating to taxable transactions
and reporting requirements
4. Explain the key features of integrated computerised
accounting systems
5. Describe a range of methods and formats for presenting
financial data
6. Outline options, methods and practices for recording and
reporting deductions, benefits and depreciation
7. Identify and explain the key principles of double-entry
bookkeeping and accrual accounting
Feedback and result outcome:
Satisfactory
Not Yet Satisfactory
Re-assessment required
Trainer/ Assessor’s declaration: I hereby certify that the above
student has been assessed by myself and all
assessments are carried out as required by
the Principles of Assessments (Clause 1.8 of
the Standards for RTO 2015).
Trainer/ Assessor’s Initials
D
a
t
e
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