Deakin University MAA363 Corporate Accounting Assignment - Question 3

This document presents a comprehensive solution to Question 3 of the MAA363 Corporate Accounting assignment. The solution meticulously calculates the taxable profit and current tax liability for the financial year ending June 30, 2017, incorporating adjustments for disallowed and allowed amounts as per income tax regulations. It includes detailed journal entries to recognize the current tax liability and account for deferred tax assets and liabilities, along with workings for depreciation, provisions for doubtful debts, rent receivable, prepaid insurance, warranty, annual leave, and long service leave. The solution also addresses the tax effects of changes in tax rates, providing relevant journal entries. Furthermore, it provides workings for the profit as per income tax and the calculation of the taxable amount, ultimately determining the tax liability at 30%. The document is a valuable resource for understanding corporate accounting principles and tax implications.

Department of Accounting
MAA363 CORPORATE ACCOUNTING
ASSIGNMENT - Trimester 2, 2017
Question THREE Proforma
Family name: First names:
Deakin ID
Deakin Username:
SPECIAL INSTRUCTIONS:
 Question 3 must be completed and submitted on this proforma.
 Please ensure that you understand the University rules on plagiarism – it must be
your own work.
 Include your answer in sections provided but include WORKINGS on the LAST
PAGE of the answers to each question.
 You can create more lines on the journal entry tables etc. by placing the cursor at the
end of a row and pressing return.

2
Question 3 (Proforma) MAA363 Corporate Accounting
QUESTION 3 (PART A)
1. Calculate the taxable profit and the current tax liability for financial year ended 30
June 2017.
Calculation of the taxable profit / tax loss and the
current tax liability
Profit before tax (as given in the question)
Add: Amount disallowed in Income Tax :
Depreciation as per Accounting 551250
2342000
Entertainment Expense
Insurance Expense
Annual Leave Expense
Long Service leave expenses
Warranty Expense
Prov. For Doubtful debts
Less: Rent Revenue
Less: Amounts allowed as deduction:
Insurance Expense
Annual Leave Expense
Long Service leave expenses
Warranty Expense
Bad debts
Depreciation as per Income tax
Add: Rent Revenue in cash
45000
137000
47000
112000
273000
27000
147000
1045250
124000
16000
89000
317000
16000
735000
135000
-1162000 -116750
Taxable income as per Income tax
Income tax liability (30% of 2225250)
2225250
667575
Income tax liability (30% of 2225250) 667575
Journal entries to recognise current tax liability/ tax loss.
Date Particulars Dr Cr
30th June ‘17 Profits and loss account Dr. 667575
To provision for income tax 667575
(Being tax liability for the year
booked)
Insert student ID number here

3
Question 3 (Proforma) MAA363 Corporate Accounting
2. Calculate deferred tax asset and deferred tax liability balances as at 30
June 2017.
Accounts Carrying
Amount
Tax Base Taxable
Temporary
Difference
Deductible
Temporary
Difference
$ $ $ $
Depreciation
Entertainment Expense
Insurance Expense
Annual Leave Expense
Long Service leave exp
Warranty Expense
Prov. For Doubtful debts
Rent Revenue
551250
45000
137000
47000
112000
273000
27000
-147000
494000
-735000
0
-124000
-16000
-89000
-317000
-16000
135000
-427000
-183750
67000
-55125
(183750*30%)
20100
(67000*30%)
Total Temporary Differences -116750 -35025
Creation of net deferred liability (30% of 116750) -35025
Opening deferred tax liability balance as on 30th June,
2016
102900
Reversal of the liability (102900-35025) 67875
Adjustment: Reversal of the deferred tax liability 67875
Tax effect journal entries at 30 June 2017
Date Particulars Dr Cr
30th Jun’17 Deferred tax liability Dr. 67875
To Profit and loss account 67875
(Being reversal of deferred tax
liability)
Insert student ID number here

4
Question 3 (Proforma) MAA363 Corporate Accounting
3. Tax effect journal entries to account for changes in tax rate
4. Journal entries to account for current tax liability as at 30 June 2017
Insert student ID number here
Date Particulars Dr Cr
1st Jul’17 Deferred tax liability Dr. 2335
To Profit and loss account 2335
(Being reversal of deferred tax
liability)
1st Jul’17 Profit and loss account Dr. 19260
To Deferred tax asset 19260
(Being reversal of deferred tax asset)
Date Particulars Dr Cr
30th June
‘17
Profits and loss account Dr. 604575
To provision for income tax 604575
(Being tax liability for the year
booked)

5
Question 3 (Proforma) MAA363 Corporate Accounting
WORKINGS FOR QUESTION 3
Workings for the questions should be included here.
1. Workings for depreciation
Machinery A/C
To Opening Balance 3350000 By Bank - Sale 500000
To Gain on Sale of Machinery 45000
To Bank - Purchase 1120000 By Closing Balance 4000000
4500000 4500000
Accumulated Depreciation A/C
To Depreciation on sale of M/C 195000 By Opening Balance 900000
(650000-455000)
By Depreciation 551250
To Closing Balance 1256250
1451250 1451250
Depreciation as per accounting: $ 551250
Depreciation as per Income tax: $ 735000 (551250*20/15)
2. Provision for doubtful debt
Provision for doubtful debt A/C
To Bad Debt 16000 By Opening Balance 38000
By Expense for doubtful debt 27000
To Closing Balance 49000
65000 65000
3. Rent Receivable
Rent Receivable A/C
To Opening Balance 16000 By Bank – Balancing Figure 135000
To Revenue 147000 By Closing Balance 28000
163000 163000
4. Prepaid insurance
Prepaid insurance A/C
To Opening Balance 27000 By insurance expense 137000
To Bank – Balancing Figure 124000 By Closing Balance 14000
151000 151000
5. Provision for warranty
Provision for warranty A/C
To Bank 317000 By Opening Balance 398000
By expense for year 273000
To Closing Balance 354000
671000 671000
Insert student ID number here

6
Question 3 (Proforma) MAA363 Corporate Accounting
6. Provision for annual leave
Provision for annual leave A/C
To Bank 16000 By Opening Balance 112000
By expense for year 47000
To Closing Balance 143000
159000 159000
7. Provision for long service leave
Provision for long service leave A/C
To Bank 89000 By Opening Balance 384000
By expense for year 112000
To Closing Balance 407000
496000 496000
Workings for part 3:
Opening balance of DTA 288900
Opening Balance of DTL 35025
Reversal of DTA on account of change in tax rate 19260 (288900*2/30)
Reversal of DTL on account of change in tax rate 2335 (35025*2/30)
Workings for part 4:
Profit as per Income tax 2225250
Less: unutilised balance of loss, utilised now 210000
Taxable amount as per Income tax 2015250
Tax @ 30% 604575
Insert student ID number here