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Presentation/PPT
27/08/2022
Need this question to be solved.
Splitit Ltd commences operation on 1 July 2017 and present its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2018. The statements are prepared before considering taxation. The following information is available:
Splitit
Statement of comprehensive income [extracts]
For the year ended June 30, 2018
Gross Profit
$750,000
Expenses:
Administrative expenses
$100,000
Salaries
225,000
Doubtful debts
10,000
Long service leave
30,000
Warranty expenses
25,000
Depreciation expense – computers
50,000
Insurance
40,000
(480,000)
Profit before tax
$270,000
The statement of financial position at 30 June 2018 showed the following net assets.
Splitit Ltd
Statement of financial position [extracts]
For the year ended June 30, 2018
Assets
Cash
$70,500
Inventory
176,700
Receivables (net)
110,000
Less Provision for doubtfull debts
10,000
100,000
Prepaid insurance
20,000
Land at market value
350,000
Computers
400,000
Less Accumulated Depreciation
50,000
350,000
Total assets
$1,067,200
Liabilities
Accounts payable
$83,900
Salaries payable
14,300
Provision for warranty expenses
14,500
Provision for long service leave
17,500
Loan payable
230,000
Total liabilities
$360,200
Net assets
$707,000
Other information:
(a) Amounts received from sales, including those on credit terms, are taxed at the time of the sale is made.
(b) All administration and salaries expenses incurred have been paid as at 30 June 2018 except $14,300 salaries remain unpaid.
(c) Insurance was initially prepaid to the amount of $60,000. At 30 June 2018 the unused component of the prepaid insurance amounted to $20,000.
(d) The computers is depreciated over 8 years for accounting purposes, but over 5 years for taxation purposes.
(e) Warranty expenses were accrued for the year ending 30 June 2018 and actual payments of $10,500 had been made.
(f) An amount of $12,500 long service leave expense has been paid.
(g) Splitit Ltd decided to revalue land at 30 June 2018. This parcel of land was purchased at a cost of $250,000 and the market value of the land is $350,000.
(h) The tax rate is 30 per cent.
Required:
1. Compute the taxable income or loss. 2. Complete the Taxation Worksheet on the next page in accordance with AASB 112 Income Tax .
3. Prepare the applicable journal entries at 30 June 2018 to account for tax using the balance sheet method.
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