Stuart Ltd commences its operations on 1 July 2019. One year after the commencement of its operations (30 June 2020) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020. The statements are prepared before considering taxation. The following information is available.

Stuart Ltd

Statement of Comprehensive Income for the year ended 30 June 2020

	$	$
Sales revenue	10,250,000
Cost of Goods Sold	4,650,000
Gross Profit		5,600,000

Expenses:
Salaries and wages	1,050,000
Selling expense	35,000
Administrative expenses	700,000
Provision for doubtful debts	175,000
Warranty expenses	210,000
Long service leave	350,000
Depreciation expense – Plant	560,000
Insurance	230,000
		3,310,000
Accounting profit for the year		2,290,000

Stuart Ltd

Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2020

	$	$
Assets
Cash and cash equivalent		160,000
Accounts receivables (net)		525,000
Inventory		700,000
Prepaid insurance		70,000
Plant– cost	2,800,000
Less- Accumulated depreciation	560,000
		2,240,000
Land		3,150,000
Total assets		6,845,000

Liabilities
Accounts payables		560,000
Provision for warranty expenses		120,000
Provision for long service leave		170,000
Bank loan payable		1,400,000
Total liabilities		2,250,000
Net assets		4,595,000

0ther information:

All selling, administration, and salaries and wages expenses incurred have been paid as at year-end.
Stuart Ltd has some land which cost $2,300,000 and which has been revalued to its fair value of $3,150,000.
Insurance was initially prepaid to the amount of $300,000. At the year-end, the unused component of the prepaid insurance amounted to $70,000. Actual amounts paid are allowed as a tax deduction.
The amount of $180,000 long service leave expense has been paid.
The plant is depreciated over 5 years for accounting purposes, but over 4 years for taxation purposes.
Warranty expenses were accrued $210,000 and, at the year-end actual payments of $90,000 had been made (leaving of accrued balance of $120,000). Deductions for tax purposes are only available when the amounts are paid and not as they accrued.
Amounts received from sales, including those on credit terms, are taxed at the time of the sale is made.
The tax rate is 30 per cent.

Required:

Compute the taxable income or loss. (using excel spreadsheet).
Complete the Taxation Worksheet on the next page in accordance with AASB 112 Income Taxes. (using excel spreadsheet).
Prepare the applicable journal entries at 30 June 2020 to account for tax using the balance sheet method.

Stuart Ltd

Taxation Worksheet as at 30 June 2020

Item	Carrying amount $	Tax Base $	Deductable Temporary Difference $	Taxable Temporary Difference $	Tax Expense $	Revaluation Surplus $	Tax Payable $
Assets
Cash
Accounts receivables (net)
Prepaid insurance
Inventory
Plant – net
Land

Liabilities
Accounts payables
Provision for long service leave
Provision for warranty
Bank loan payable

Net assets
Temporary difference for year
Loss carried forward
Movement for the period
Tax effected at 30%
Tax on taxable income
Income tax adjustment

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