INCOME TAXES

Iris Ltd's accounting profit for the year ended 30 June 2010 was $250.450. Included i
were the following items of revenue and expense :
Amortisation 30,000
Impairment of goodwill expense 7,000
Depreciation - equipment (15%) 40,000
Entertainment expense 12,450
Insurance expense 24,000
Bad debt expense 14,000
Loss on sale of equipment 6,667
Rent revenue 25,000
Annual leave expense 54,000

At 30 June 2010, the company's draft statement of financial position showed the
following balances :
30-Jun-10 30-Jun-09
Assets ;
cash 55,000 65,000
A/R 295,000 277,000
AFDA (16,000) (18,000)
Inventories 162,000 185,000
Prepaid Insurance 30,000 25,000
Rent receivables 3,500 5,500
Development project 120,000 -
Acc amortisation (30,000) -
Equipment 200,000 266,667
Acc depreciation (90,000) (80,000)
Goodwill 35,000 35,000
Acc impairment expense (14,000) (7,000)
Deferred Tax Asset (DTA) ? 24,900

Liabilities :
A/P 310,500 294,000
Provision for annual leave 61,000 65,000
Mortgage Loan 100,000 150,000
Deferred Tax Liabilities (DTL) ? 57,150
Current Tax Liabiltities (CTL) 40,670 12,500

Additional Information :
1. taxation legislation allows Iris Ltd to deduct 125% of the $120.000 spent on
development during a year
2. Iris has capitalised development expenditure relating to a filter project and
amortises the balance over the period of expected benefit (4 years)
3. The taxation depreciation rate for equipment is 20%
4. The equipment sold on 30 June 2010 cost $66.667 when it was purchased 3 years
5. Neither entertainment expenditure nor goodwill impairment expense is deductible
taxation purposes
6. The company income tax rate is 30%

Accounting Profit
Adjustment :
Add :
amortisation of development 30,000
Depreciation exp (15%) 40,000
loss on sale of equipment 6,667
gain on sale of equipment 3,333
Entertainment expense 12,450
impairment of goodwill exp 7,000
Insurance expense 24,000
Doubtful debt exp 14,000
Rent received 27,000
Annual leave expense 54,000

deduct :
development cost : 125% x 120.000= 150,000
Depreciation expense ;20% x 266,667= 53,333
Prepaid insurance PAID 29,000
rent revenue 25,000
written of - A/R 16,000
annual leave PAID 58,000

TAXABLE PROFIT
Current Liability @30%

30-Jun-10
Income tax expense 41,270
Current tax liability 41,270

based on accounting : Based on tax :

acquisition cost 66,667 66,667
Depr exp/year : 15% x 66.667= 10,000 13,333
Total acc depr for 3 years 30,000 40,000
BV 36,667 26,667
Selling price 30,000 30,000
loss on sale (6,667) 3,333

Prepaid insurance, ending 30,000

Insurance exp 24,000
total prepaid insurance 54,000
Prepaid insurance, beginning 25,000
cash paid for prepaid insurance 29,000
Rent receivables, beg 5,500
Rent revenue, create new receivables 25,000
Total rent receivables 30,500
Rent receivables, ending 3,500
cash received 27,000

AFDA, beginning 18,000

bad debt exp (add AFDA) 14,000
Total AFDA 32,000
AFDA, ending 16,000
A/R written of 16,000

annual leave payable, beg 65,000

annual leave exp, create new payable 54,000
Total annual leave payable 119,000
Annual leave, ending 61,000
cash PAID for annual leave 58,000
AXES

10 was $250.450. Included in this profit

ial position showed the

e $120.000 spent on

o a filter project and

t (4 years)

n it was purchased 3 years ago

ment expense is deductible for

250,450
 218,450

331,333
137,567
41,270

sed on tax :

20% x 66.667

GAIN
Permanent difference (perbedaan permanen) ---> boleh atau tidak boleh
temporary difference (perbedaan temporer) ---> beda karena waktu
Deferred Tax Liabilities (DTL) = di masa depan, pajak yang akan dibayar lebih besar
Deferred Tax Assets (DTA) = di masa depan, pajak yang akan dibayar lebih kecil
Current Tax Liabilities (CTL) = pajak yang harus dibayar setelah rekonsiliasi fiskal

Accounting Profit 250,450

add back : amortization 30,000
Less : 125% x $120.000 = - 150,000

add back : depreciation 40,000

less : 20% x $266.667 - 53,333

add back : loss on sale of equipment 6,667

Tax :
Cost = 66,667
Depreciation (20% / year) 13,333
Acc depr (3 years) 40,000
Book value = 26,667
Selling price 30,000
Gain on sale 3,333

Accounting :
Cost = 66,667
Depreciation (15%%/year) 10,000
Acc depr (3 years) 30,000
Book value = 36,667
Loss on sale 6,667
Selling price 30,000

Add back : impairment of goodwill 7,000

Add back : entertainment expense 12,450
Add back : insurance expense 24,000
Less : cash paid for insurance
(24.000 + 30.000 - 25.000) = - 29,000

Add back : bad debt expense 14,000

less : A/R write-off (18.000 + 14.000 - 16.000) - 16,000

Add back : annual leave expense 54,000

Less : cash paid for leave expense
(65.000 + 54.000 - 61.000) - 58,000

Taxable profit 135,567

Tax rate = 30% - 40,670
Adjusted net profit 94,897

DTA = di masa depan, pajak yang akan dibayar lebih kecil

DTL = di masa depan, pajak yang akan dibayar lebih besar

Acc Tax Difference

A/R 295,000 295,000
AFDA - 16,000 -
279,000 295,000 16,000

Prepaid insurance 30,000 - 30,000

Development pproject 120,000 - 120,000

Equipment 200,000 200,000

Acc depr - 90,000 - 120,000
110,000 80,000 30,000

Depr / year 30,000 40,000

usage 3 3
Goodwill 35,000 35,000
Acc impairment - 14,000 -
21,000 35,000 14,000

Provision for annual leave 61,000 - 61,000

DTA & DTL (Tax rate (30%)

beginning
Adjustment

Journal :
Tax expense 2,850
DTA 1,800
DTL 1,050
k boleh

dibayar lebih besar

ayar lebih kecil
ekonsiliasi fiskal
DTA DTL

16,000

30,000

120,000

30,000
 14,000

61,000
77,000 194,000
23,100 58,200
24,900 57,150
- 1,800 1,050
EXERCISE :
Accounting profit for the year ended 30 June 2011 was $60.000,
it include the following :
rent revenue 3,000
Government grant received (non taxable) 1,000
bad debt exp 6,000
Depreciation of plant 5,000
annual leave exp 3,000
entertainment exp 1,800
Depreciation of buidling 2,000
gain on sales of building 400

Additional information :
1. Depreciation for Plant (12% Tax, 10% acc)
2. useful life of buidling (15 years Acc, 20 years tax), no residual value,
using straight line method.
3. On 30 jun 2011, the buidling that has acqusition cost $3.000 was
sold for $1.800. It was bought 8 years ago.
4. tax rate 30%

Required :
Prepare tax reconciliation (determine profit based on tax) & CTL
Statement of financial position on 30 Jun as follows ;
2,011 2,010
cash 8,000 8,500
Inventory 17,000 15,500
A/R 50,000 48,000
AFDD (5,500) (4,000)
Office supplies 2,500 2,200
plant 50,000 50,000
Acc depr (25,000) (20,000)
Buildings 27,000 30,000
Acc depr (14,400) (14,000)
goodwill 7,000 7,000
DTA ? 4,050

A/P 29,000 26,000

Provision for annual leave 10,000 7,500
rent received in adv (unearned rent 2,500 2,000
DTL ? 3,150
CTL ??
Accounting profit for the year ended 30 June 2018 was $90.000, Statement of financial
it include the following :
rent revenue 4,500 cash
Government grant received (non taxable) 1,500 Inventory
bad debt exp 9,000 A/R
Depreciation of plant 7,500 AFDD
annual leave exp 4,500 Office supplies
entertainment exp 2,700 plant
Depreciation of building 3,000 Acc depr
gain on sales of building 400 Buildings
Acc depr
Additional information : goodwill
1. Depreciation for Plant (8% Tax, 10% acc) DTA
2. useful life of buidling (10 years Acc, 12 years tax), no residual value,
using straight line method. A/P
3. On 30 jun 2018, the buidling that has acqusition cost $4.500 was Provision for annual le
sold for $2.200. It was bought 6 years ago. rent received in adv (u
4. tax rate 25% DTL
CTL
Required :
Prepare tax reconciliation (determine profit based on tax) & CTL

Accounting profit 90,000

(-) rent revenue - 4,500
(+) rent received 5,250
(-) government grant - 1,500
(+) bad debt expense 9,000
(-) uncollected A/R - 6,750
(+) depreciation of plant 7,500
(-) depreciation of plant - 6,000
(+) annual leave expense 4,500
(-) annual leave paid - 750
(+) entertainment expense 2,700
(+) depreciation of building 3,000
(-) depreciation of building - 3,750
(-) gain on sales of building - 400
Acquisition 4,500
useful life 12 years
Depr / year 375
Acc depr (6 years) 2,250
Book value 2,250
Sales price 2,200
Loss on sale of building - 50
taxable profit 98,250
Statement of financial position on 30 Jun as follows ;
2,018 2,017
12,000 12,750
Inventory 25,500 23,250
75,000 72,000
(8,250) (6,000)
Office supplies 3,750 3,300
75,000 75,000
Acc depr (37,500) (30,000)
Buildings 40,500 45,000
Acc depr (24,300) (21,000)
goodwill 10,500 10,500
? 4,050

43,500 39,000
Provision for annual leave 15,000 11,250
rent received in adv (unearned rent 3,750 3,000
? 3,150
??

Point

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Accounting profit for the year ended 30 June 2018 was $90.000,
it include the following :
rent revenue 4,500
Government grant received (non taxable) 1,500
bad debt exp 9,000
Depreciation of plant 7,500
annual leave exp 4,500
entertainment exp 2,700
Depreciation of building 3,000
gain on sales of building 400

Additional information :
1. Depreciation for Plant (8% Tax, 10% acc)
2. useful life of buidling (10 years Acc, 12 years tax), no residual value,
using straight line method.
3. On 30 jun 2018, the buidling that has acqusition cost $4.500 was
sold for $2.200. It was bought 6 years ago.
4. tax rate 25%

Required :
Determine DTA & DTL
Acc Tax Diff DTA
A/R 75,000 75,000
AFDD - 8,250 -
66,750 75,000 8,250 8,250

Acc Tax Diff DTA

Plant 75,000 75,000
Acc depr - 37,500 - 30,000
37,500 45,000 7,500 7,500

Acc :
Cost 75,000
Depr / year (10%) 7,500
Acc depr 37,500
depreciated year 5
Tax :
Cost 75,000
Depr / year (8%) 6,000
Acc depr 30,000

Acc Tax Diff DTA

Buildings 40,500 40,500
Acc depr - 24,300 - 20,250
16,200 20,250 4,050 4,050

Acc :
Cost 40,500
Depr / year (10 years) 4,050
Acc depr - 24,300
depreciated year 6

Tax :
Cost 40,500
Depr / year (12 years) 3,375
Acc depr 20,250
DTA
Provision for annual leave 15,000 - 15,000 15,000

rent received in adv 3,750 - 3,750 3,750

38,550

Tax rate (25%) 9,637.5

beginning 4,050
adj 5,587.50

Journal :
DTA 5,587.5
DTL 3,150
Income tax expense 8,737.5
Statement of financial position on 30 Jun as follows ;
2,018 2,017
cash 12,000 12,750
Inventory 25,500 23,250
A/R 75,000 72,000
AFDD (8,250) (6,000)
Office supplies 3,750 3,300
plant 75,000 75,000
Acc depr (37,500) (30,000)
Buildings 40,500 45,000
Acc depr (24,300) (21,000)
goodwill 10,500 10,500
DTA ? 4,050

A/P 43,500 39,000

Provision for annual leave 15,000 11,250
rent received in adv (unearned rent) 3,750 3,000
DTL ? 3,150
CTL ??

DTL Point

DTL

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DTL

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DTL
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3,150
3,150

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