Question

Bellago Ltd made an accounting profit before tax of $75,000 for the year ended 30 June 2020.The following items were included in the accounts:
                 Donations to political parties , non-deductible           4,000
                 Depreciation machinery ,20%                                      15,000
                 Annual leave expense                                                      5,800
                 Rent revenue                                                                     8,000
                 Goodwill amortised , non-deductible                         12,000
         For tax purposes the following applied :
                Depreciation rate for machinery                                       15%
                Annual leave paid                                                             4,500
                Rent received                                                                  12,000
                Income tax rate                                                                    30%
          
        Required

         Use a current tax worksheet to calculate the current tax liability for the year ended 30 June 2020. Prepare the adjusting journal entry.

Answer 1

Profit before tax 75,000

Add:- Income taxable and expenses inadmissible

  Donations to political parties (non-deductible) 4,000

  Depreciation expense–Machinery 15,000

Rent recieved 12,000

Annual leave expense 5,800

Goodwill amortised (non-deductible) 12,000 48,800   

1,23,800

Less:- Expenses admissible and income non taxable

Rent Revenue 8,000

Annual leave paid 4,500

Depreciation of machinery for tax 11,250 ( 23,750)

Taxable Income 1,00,050

Current Liabality @ 30% 30,015

Journal entry

30th June 2020

Income Tax Expense (current) a/c Dr 30015

To Current Tax Liabality a/c 30015

[ Being recognition of current tax liabality]