On 1 July 2017, Bright Star Ltd was incorporated. The accounting profit and other relevant information of Bright Star for the two years to 2019 are as follows:
| 2019 | 2018 | |
| Profit before tax | $4 500 000 | $3 600 000 |
| Warranty expense | — | 1500 000 |
| Depreciation expense – machinery | 60 000 | 60 000 |
| Gain on sale of machinery for accounting | — | — |
| Warranty paid | 750 000 | — |
| Tax depreciation – machinery | 90 000 | 90 000 |
| Gain on sale of machinery for tax | — | — |
| Provision for warranty – carrying amount |
750 000 |
1500 000 |
| Provision for warranty – tax base | — | — |
| Machinery – carrying amount | 180 000 | 240 000 |
| Machinery – tax base | 120 000 | 210 000 |
The company tax rate is 30%.
Required
- Calculate the current and deferred tax of Bright Star Ltd for each year, 2018 and 2019.
- Prepare the required tax journal entries for each year.
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