a) Techtronic Ltd provides IT products and solutions. The following is an extract of its financial statements: Statement of Comprehensive Income for the year ended 30 June 2015 Gross Profit from trading $ 2 288 000 less: Expenses Borrowing costs 6 000 Depreciation on equipment 5 200 Doubtful debts expense 8 800 Insurance 57 600 Accounting fees 9 200 Annual leave 9 600 Rent on premises 240 000 Salaries and wages 496 000 Long service leave expenses 11 200 Other expenses 1 108 400 1 952 000 Net Profit before income tax $336 000 continued … Page 2 of 4 Assets and liabilities of Techtonic for the last two years include: 30 June 2015 30 June 2014 Assets Cash 555 200 539 200 Accounts receivable 400 000 300 000 Less provision for doubtful debts 20 000 380 000 16 000 284 000 Borrowing costs 36 000 0 Less expense for year 6000 30 000 Inventory 200 000 160 000 Prepaid insurance 4800 2 400 Deferred tax asset ? 9 680 Equipment 88 000 88 000 Less Accumulated depreciation 10 400 77 600 5 200 82 800 Investments Land 3 120 000 0 Liabilities Deferred tax liability ? 7 800 Accounts payable 263 200 120 000 Provision for annual leave 20 800 14 400 Provision for long service leave 16 000 4 800 Mortgage payable 354 960 196 800 The following items are treated differently for taxation purposes than for accounting purposes: • Insurance and annual leave is expensed during the year but is not deductible for tax purposes until paid. • Long service leave expense is only allowable as a tax deduction when paid. • Borrowing costs are fully deductible for tax purposes when paid. • The company provides for doubtful debts expense, however only the bad debt is allowable as a tax deduction when the bad debt is written off. • The equipment is depreciated on a straight-line basis. For the current year, for tax purposes it is $14 400. The tax base of the equipment at 30 June 2014 was $73 600. • The company tax rate is 30%. (Hint: your answer only needs to deal with the items listed above). Page 3 of 4 continued … REQUIRED: Submit your answer on the Question TWO Proforma For Techtronic Ltd: (a) Calculate the taxable income and the current tax liability for financial year ended 30 June 2015. (b) Prepare the journal entry to recognise current tax liability. (c) Calculate the deferred tax asset and deferred tax liability balances as at 30 June 2015. Show your calculations using the deferred tax worksheet as provided in the proforma. (d) Prepare the tax-effect journal entries for the year ended 30 June 201