Holmes Institute HI5025 Memo 04 – T02, 2015
Mr Tom Crane, the president of Australian Crane Mining Enterprises (ACME), informed you that ACME has an accounting profit before tax (PBT) of $550,000, the corporate tax rate is 30 percent, and (during the tax year) WCIL experienced and journalised the following items:
i. Goodwill was found to be impaired and was written down by $50,000.
ii. During the year, the CIL sales people spent $35,000 entertaining customers.
iii. A $240,000 fine for unlawful environmental degradation after one of its tailings- pond dam broke and contaminated sensitive wetlands with slurry.
iv. Payments of $50,000 to lawyers who represented ACME in an unsuccessful court challenge of the above fine.
v. Prepaid rent of $200,000 was paid for a new warehouse that will be used in the following tax year.
vi. Dividends of $45,000 were paid to common shareholders. vii. An accounting depreciation expense of $100,000 and for tax purposes will claim depreciation of $180,000.
viii. An accounting Warranty Expense of $300,000 and actual payouts for warranty costs of $280,000.
ix. Long service leave payments of $335,000 and accruals of $240,000
x. The Bad Debt Expense for accounting purposes was $83,000 and during the year $63,000 in Accounts Receivable (A/R) was written-off.
Required:
In Good memo form provide Mr Tom Crane with the:
a) Income Tax Expense and show the workings.
b) Income Tax Payable and show the workings.
c) Difference between the Income Tax Expense and the Income Tax Payable – say what it is called and discuss whether its attributes the same as any other asset/(liability)?