Flaxton Ltd made an accounting profit before tax of $40 000 for the year ended 30 June 2021. Included in the accounting profit were the following items of revenue and expense.
Donations to political parties (non?deductible) |
5000 |
Depreciation expense — machinery (20% p.a., straight?line) |
15000 |
Annual leave expense |
56000 |
Rent revenue |
12000 |
For tax purposes the following applied.
Depreciation rate — machinery |
25% |
Annual leave paid |
65000 |
Rent received |
10000 |
Income tax rate |
30% |
Required
1. Calculate the current tax liability for the year ended 30 June 2021, and prepare the adjusting journal entry.
2. Explain your treatment of rent items in your answer to requirement 1. Following AASB112
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