Question

1.       The following information is provided from the accounting records of Rubicon Ltd financial year ending 30 June 2019. All accounts have a zero (0) balance at the start of the accounting period.

Profit before tax	$280 000
Revenue received in advance	48 000
Prepaid insurance	18 000
Sick leave expense	15 000
Sick leave paid	12 500
Provision for sick leave	2 500

The tax treatment for each of the items is as follows:

· Rubicon Ltd had purchased a machine on 1 July 2018 at a cost of $140 000. Depreciation over 10 years for accounting and 7 years for tax. Assume nil residual value.

·         For tax purposes, revenue received in advance is treated as assessable income in the period in which the cash is received.

·         For tax purposes, insurance is tax deductible when paid.

·         The tax rate is 30% and there are no other differences between accounting and tax treatments.

Required:

Prepare the general journal entry for the current income tax expense for 30 June 2019

Answer 1

The answer to question is given in table below, along with Tax Computation working