Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to have a useful life of 5 years
(straight-line basis) and no residual value. For taxation purposes, the ATO allows the company to depreciate the asset over 4 years. The profit before tax for the company for the year ending 30 June 2017 is $600,000. To calculate this profit the company has deducted $60,000 entertainment expense, and $80,000 salary expense that has not yet been paid. Also the company has included $70,000 interest as income that the company has not yet received. The tax rate is 30%.
Required:
(a) Calculate the company’s taxable profit and hence its tax payable for 2017. (2 marks)
(b) Determine the deferred tax liability and/or deferred tax asset that will result. (2 marks)
(c) Prepare the necessary journal entries on 30 June 2017. (3 marks)
Jaguar Ltd's profit prior to tax stands at $600,000. For the year 2017, non-allowed expenses that need to be added include: Entertainment expense of $60,000 and Unpaid salary expense of $80,000, totaling $140,000. Deductions involve: a depreciation difference of $32,000 and unreceived interest of $70,000, totaling $102,000. (a) The adjusted taxable profit is $638,000. (b) The tax payable is calculated as 30% of $638,000, resulting in $191,400. For the deferred tax liability calculation (b), depreciation accounts for $32,000 and unreceived interest as $70,000, totaling $102,000. This corresponds to a deferred tax liability of $30,600 (30% of $102,000). For the deferred tax asset, the unpaid salary expense totals $80,000, yielding a deferred tax asset of $24,000 (30% of $80,000). (c) The journal entries for 30 June 2017 include debiting income tax expense $191,400 and crediting income tax payable $191,400 for the tax expense for the year. Additionally, debit deferred tax asset $24,000 and credit income tax expense $24,000 to create the deferred tax asset on the deductible expense. Lastly, debit income tax expense $30,600 and credit deferred tax liability $30,600 to create the deferred tax liability on deferred income.
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Analyzing customer wait times: A manager can leverage this data to identify operational pain points, implement strategies to minimize wait times, set employee expectations, and ultimately improve prompt service for customers.
