Lease: Income tax payment and Lease

This article covers the computation of lease liabilities and right to use assets cost in accordance with the AASB 16 lease. It also covers the accounting profit for the year ended 2017, computation of depreciation as per taxable rules, income tax payable, and journal entries for income tax.

Lease
Income tax payment and Lease
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Table of Contents
Required-1(a).....................................................................................................................................2
(b)......................................................................................................................................................4
©.......................................................................................................................................................4
Requirement-2.......................................................................................................................................4
2(a)....................................................................................................................................................4
2(b)....................................................................................................................................................5
2 ©....................................................................................................................................................5
2 (d)...................................................................................................................................................6
References.............................................................................................................................................7

This will reveal all the applicable laws and standards which will reflects the amount
of lease liabilities and right to use assets cost in accordance with the AASB 16 lease (Hoitash,
and Hoitash, 2017).
Requirment-1
1(a)
Determine the lease liabilities and right to use assets in accordance with the AASB 16
lease
Computation of the lease liabilities
Year Lease rent PVF@10% PV
2021 50000 0.90909091 45454.5455
2022 50000 0.82644628 41322.314
2023 50000 0.7513148 37565.74
2024 50000 0.68301346 34150.6728
2025 50000 0.62092132 31046.0662
2026 50000 0.56447393 28223.6965
PV of lease liabilities 217763.035

Computation of the right to use assets cost in accordance with the AASB 16 lease
(Jarva. and Silvola, 2017.).
Initial cost incurred 20000
Computation of the lease liabilities
Year Lease rent PVF@10% PV
2021 50000 0.90909091 45454.5455
2022 50000 0.82644628 41322.314
2023 50000 0.7513148 37565.74
2024 50000 0.68301346 34150.6728
2025 50000 0.62092132 31046.0662
2026 50000 0.56447393 28223.6965
PV of lease liabilities 217763.035
P.V. of purchase option cost 50000
0.5644739
3
28223.696
5

Total right use cost lease payment= $ 265986.731
(b)
Date Lease payment Interest
expenses
Principle
reduction
Outstanding
lease liabilities
30th June 2021 $50,000 $21776 $ 28223.3 $ 189539.33
30th June 2022 $50,000 $18953 $31046.07 $158493.99
(Jarva, and Silvola, 2017).
©
Lease received a/c Dr 217763
Assets 217763
Lease a/c Dr $50,000
To cash a/c $50,000
Requirement-2
Accounting profit for the year ended 2017 = $ 3000000
2(a)
 Accounting profit for the year ended 2017 = $ 3000000
 Plant purchased cost on 2013= $ 2000000
 Computation of the depreciation as per the taxable rules
 Accounting profit for the year ended 2017 = $ 3000000
 Computation of the depreciation as per the taxable rules
 2000000/4= $ 500000

 Taxable profit= 3000000-5000000
 Taxable profit for the year ended on 30th June, 2017= $ 2500000
2(b)
 Accounting profit for the year ended 2017 = $ 3000000
 Computation of the depreciation as per the taxable rules 2000000/4= $ 500000
 Taxable profit= 3000000-5000000
 Taxable profit for the year ended on 30th June, 2017= $ 2500000
 Income tax rate= 30%
 Income tax expenses= $ 2675000*30%= $802500
(Nong, Meng, and Siriwardana, 2017.
Computation of the income tax payable
 Accounting profit= $ 3000000
 Book Profit after depreciation= 30, 00,000 – 325000= 2675000
 Profit as per income tax rules= 30, 00,000- 5, 00,000= 25, 00,000
 Income tax payment as per the income tax rules = 25, 00,000*30%= 7, 50,000
 Income tax payment as per the accounting rules = 267500*30%= 802500
 Income tax payable= $ 669750
2 ©
Items Carrying
amount
Tax base Deductible
temporary
differences
Taxable
temporary
difference
s
DTA DTL
Plant
(30th
June,
2016)
775000 30% - $1750000 - (500000-
325000)*30%
52500
Plant 450000 30% - 1750000 - (500000-

(30th
June,
2017)
325000)*30%
52500
(Saad, 2014).
2 (d)
Journal entries for the income tax
 Deferred Tax expenses= 525000
 Current Income Tax = 447500
 Income tax payable= (5, 00,000- 52500) = 447500
 Deferred tax liabilities= 52500
Journal entries for the income tax
Deferred Tax expenses dr 52500
Current Income Tax dr 447500
To Income tax payable 447500
To Deferred tax liabilities= 52500
(Income tax payable and recording of deferred tax libiliteis)

References
Henderson, D. and O’Brien, P.C., (2017). The standard-setters’ toolkit: can principles prevail
over bright lines?. Review of Accounting Studies, 22(2), pp.644-676.
Hoitash, R. and Hoitash, U., (2017). Measuring accounting reporting complexity with
XBRL. The Accounting Review, 93(1), pp.259-287.
Jarva, H. and Silvola, H., (2017). The role and current status of IFRS in the completion of
national accounting rules–Evidence from Finland. Accounting in Europe, 14(1-2), pp.88-93.
Nong, D., Meng, S., and Siriwardana, M. (2017). An assessment of a proposed ETS in
Australia by using the MONASH-Green model. Energy Policy, 108, 281-291.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.