Trimester 1, 2014 1 | Page
MAA716 Financial Accounting
WRITTEN ASSIGNMENT – TRIMESTER 1, 2014
PART 2 – QUESTION 2
Submission date and available mark
Due date: Friday 9 May 2014 before 11.59 pm
Marks: This Written Assignment represents 40% of the total mark for the
unit and consists of three questions. Question 1 will be marked out of 40
and converted to a mark out of 15%.
Assignment instructions
1. Please monitor CloudDeakin for any instructions/announcements.
2. You will need to have completed topic 7 to complete this question (Q2).
Submission instructions
1. This assignment is to be submitted ONLINE ONLY (You are NOT required to
submit a hard copy).
2. You must type in your answer for each question.
3. The completed assignment question must be submitted into the allocated area
on CloudDeakin under the Dropbox folder.
4. You are not required to upload an Assignment Cover Sheet. You will
complete a Plagiarism declaration when you access the Dropbox.
5. Once submitted you cannot take your assignment back BUT you CAN
SUBMIT another version. The most recent version submitted will be marked.
Trimester 1, 2014 2 | Page
A note on plagiarism and collusion
Plagiarism and collusion are forms of cheating and is considered a serious academic
misconduct, and severe penalties are associated with them. Please refer
to the MAA 716 unit guide for your responsibilities with regard to
plagiarism and other academic offences.
Penalties applied in this assignment
1. Assignment submitted after the due date will attract a penalty of 3 marks per
day (out of the total of 40 marks for Question 2).
2. The final examination is the only hurdle requirement for the unit. If you
choose not to submit this assignment you will score zero. There is no
provision for the mark to be added to the final exam mark.
Discussion area for this assignment
There is a discussion area on CloudDeakin entitled ‘Assignment Discussion’.
This area is for you to discuss the assignment. It is an area to help each other – it
is NOT an area for the answer to be provided to each other.
Receiving your mark and suggested solution
Your mark for the assignment will be available in Grades within 15
working days from your assignment submission date.
.
Trimester 1, 2014 3 | Page
The financial accountant of Carlton Ltd has prepared draft financial statements for the year ended
30 June 2014 but is unsure about the tax calculations.
Draft income statement for the year ended 30 June 2014
Revenue 10,000,000
Cost of sales -4,000,000
Gross profit 6,000,000
Other income
Royalty income 243,000
Profit on sale of motor vehicle 68,000
Grant income 143,000
454,000
Expenses
Depreciation - motor vehicles 315,000
Depreciation - Plant & equipment 172,000
Entertaining 18,650
Annual leave 152,000
Repairs 255,000
Bad and doubtful debts 203,000
Rent 264,000
Other expenses 3,000,000
4,379,650
Profit before tax for the year 2,074,350
Extracts from the draft statement of financial position as at 30 June
2014
2014 2013
Assets
Cash 803,500 975,000
Accounts receivable 2,500,000 2,300,000
Less provision for doubtful debts 143,000 123,000
Inventory 2,600,000 2,150,000
Prepayments (rent) 34,750 40,100
Royalty income due 22,950 45,915
Deferred tax asset ? ?
Motor vehicles 1,098,000 1,800,000
Plant & Equipment 1,033,110 1,205,295
Goodwill 370,000 373,500
Liabilities
Accounts payable 1,980,000 1,800,000
Accrued annual leave 43,000 34,000
Provision for repairs 100,000 110,000
Bank loan 3,500,000 3,580,000
Current tax payable ? 48,000
Deferred tax liability ? ?
Trimester 1, 2014 4 | Page
Required:
a) Prepare the current tax work sheet and journal entry/entries to calculate and record
the current tax for the year ended 30 June 2014 as per AASB 112 “Income
taxes”. (10 marks)
b) Justify your treatment of entertainment expense and exempt income in the current
tax work sheet. (5 marks)
c) Prepare deferred tax work sheet to calculate deferred tax asset and liability as at 30
June 2013 and 30 June 2014 and prepare journal entry as per AASB 112 “ Income
Taxes” for 30 June 2014 (create columns for account name, carrying amount, tax
base, deductible temporary difference and taxable temporary difference).
(15 marks)
Question 2
Evaluate whether deferred tax assets and deferred tax liabilities arising from AASB
112 “ INCOME TAXES” meet the definition and recognition criteria outlined in the
conceptual framework. (10 marks)
Additional information
1 The tax rate is: 30%
2 Grant income is exempt from tax
3 Entertaining expenses are not allowable deductions for tax
4
Excluding revenue and cost of sales other income and expenses are taxed on a cash basis
5 The carrying value and the tax base of the vehicle sold were:
Carrying value 430,000
Tax base 344,000
6 Tax depreciation for the year was:
Motor vehicles 400,000
Plant & Equipment 200,000
7 The tax base of the assets at the start of the current year were:
Motor vehicles 1,600,000
Plant & Equipment 1,060,000