Derwent Ltd has prepared its adjusted trial balance for the year ended 30 June 2042

Question 1:
Derwent Ltd has prepared its adjusted trial balance for the year ended 30 June 2042. It has yet to determine its income tax expense for the year and the tax
assets and liabilities that arise from the transactions and events of the year. The following tables provide relevant information from the adjusted trial
balance:
TABLE 1
2042
Accounting profit 568,000
Rent revenue 161,700
Interest revenue 69,300
Warranty claims expense 95,700
Doubtful debts expense 13,860
Depreciation expense – Machinery 198,000
Workshop supplies expense 75,240
Political donations expense 15,000
TABLE 2
2042 2041
Cash 29,700 253,440
Accounts receivable 273,900 253,440
Allowance for doubtful debts (16,500) (10,560)
Inventories 221,430 192,390
Interest receivable 11,550 4,950
Workshop supplies 7,920 9,240
Machinery 990,000 990,000
Accumulated depreciation – Machinery (396,000) (198,000)
Deferred tax asset 71,181
Goodwill 290,400 290,400
Accounts payable 238,260 246,840
Unearned rent revenue 9,240 12,210
Provision for warranty claims 144,210 115,500
Deferred tax liability 4,257
Additional information:
• Political donations are not deductible for tax purposes
• Machinery assets are depreciated using straight-line at 20% p.a. with no residual
• Machinery – tax depreciation rate is 10% p.a., straight-line with no residual
• The tax rate is 30%
Required:
PART A
1. Analyse the data and information presented above and show the supporting calculations required for the values included in the two tax worksheets.
2. Prepare the current tax worksheet to calculate the current tax liability for the year ended 30 June 2042.
3. Prepare the deferred tax worksheet to calculate the movements in deferred tax accounts for the year ended 30 June 2042.
4. Provide the journal entries that arise from these tax worksheets.
5. Briefly explain how the items that arise from these journal entries will be reported in the financial statements for the year ended 30 June 2042.
PART B (Word limit 150 words)
Describe the treatment of Goodwill in Part A (i.e., in the determination of the various tax account values) and briefly explain why this treatment is
required. Your explanation must reference the relevant paragraphs of AASB 112 Income Taxes. You are required to use the Harvard referencing
method; quoted paragraphs from the standard are not included in the word count.