Current Tax and Deferred Tax Computation

Food-Pro Ltd is a special food processing company. For the financial year ended 30 June 2018, FoodPro Ltd made a profit before tax of $607,500.


The following items of income and expenses are included in the calculation of its profit for the year:


Rent revenue $60,000
Loss on disposal of plant $16,001
Depreciation expenses – plant $96,000
Entertainment expense $29,880
Amortization of Research & Development costs $72,000
Doubtful debts expense $33,600
Warranty  expenses $129,600
Insurance expense $57,600
Annual leave expense $87,990


An extract of the company’s balance sheet for the financial year ended 30 June 2018 together with comparative figures for 2017 is given as follows:





Assets  2018 2017
Bank $120,000 $150,000
Accounts receivable $708,000 $664,800
Allowance for doubtful debts $(38,400) $(43,200)
Prepaid Insurance $72,000 $60,000
Stock $388,500 $444,000
Rent receivable $8,400 $13,200
Plant $480,000 $640,001
Accumulated depreciation – Plant $(230,400) $(206,400)
Research & Development costs $288,000
Accumulated amortisation of development costs $(72,000)
Deferred tax asset ? ?
Accounts payable $745,200 $705,600
Current tax liability ? $30,000
Provision for warranty expenses $146,400 $156,000
Provision for annual leave $135,000 $120,000
Bank loan $120,000 $270,000
Deferred tax liability ? ?


Additional Information:

  • Rent revenue will be taxed on cash basis.
  • Entertainment expenditure is not allowed as a tax deduction.
  • Because of changing technology, Food-Pro Ltd decided to sell one of its specialized plants, which it purchased three years ago. The original cost of the plant was $160,001, and it was sold on 30 June 2018 for $72,000.
  • For accounting purpose, Food-Pro Ltd depreciates the acquisition cost of plant at 15% per annum using the straight-line method. For tax purpose, however the plant cost is depreciated at 20% straight line.
  • Doubtful debts expenses are not deductible for tax purpose unit the company actually incurs bad debts.
  • Employee entitlements such as annual leave and long service leave are not allowable as tax deduction until paid to the employee.
  • Insurance expense is treated as an allowable tax deduction when paid in cash.
  • A tax deduction of 125% can be claimed on Research & Development expenditure paid.
  • The tax rate for the year ended 30 June 2017 and 30 June 2018 was 30%.



  1. Calculate the taxable income/loss of Food-Pro Ltd for the year ended 30 June 2018. (15 marks)
  2. Using deferred tax worksheet, calculate the deferred tax asset (DTA) and deferred tax liability (DTL) balance as at 30th June 2017 and 30 June 2018 (Create columns for carrying amount, tax base, assessable temporary difference and deductible temporary difference). (20 marks)
  3. Prepare the tax-effect journal entries for Food-Pro Ltd for the year ended 30 June 2018. (5 marks)

Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).

After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.

If your question is slightly different from the above question, please contact us at with your version of question.