ACCT2542 Corporate Financial Reporting and Analysis – 2022 Assignment 1: Accounting for income tax
Tilly’s Tiles & Bathroom Fittings
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Student no Name UNSW email
Student Question Page 1
Tilly’s Tiles and Bathroom Fittings is an established company that has been in operation for a number of years. They have just reached the end of their financial year, and their chief accountant has fallen sick. You are asked to step into the role and provide assistance. Specifically, your help is needed with the implementation of AASB 112. The CEO would like for you to determine the current tax liability, and the deferred tax assets and liabilities. The chief accountant has a fixed template which the company has been using for years. Because your work will need to be read the company accounting system that helps prepare the final financial report you will need to stick with this template.
Below is all the relevant information that the accountant prepared before they fell sick.
Balance sheet
as at 30/6/2022
Liabilities
Cash at Bank
Accounts receivable Allowance for doubtful debts Inventory
Prepaid rent
AcDepn – Machines
Deferred tax asset
Total Assets
Accounts payable
Allowance for warranties Wages due
Provision for staff leave Revenue received in advance ATO Creditor
Deferred tax liability
Total liabilitites
Shareholder capital Retained profits
Total Equity
544,000 1,250,080
1,015,040 27,950 3,900,000
72,900 2,797,600
676,700 97,600 10,380 78,100
429,440 – 2,472,675
2,830,775 487,900
ACCT2542 Corporate Financial Reporting and Analysis – 2022 Assignment 1: Accounting for income tax
Tilly’s Tiles & Bathroom Fittings
Student Question Page 2
Income Statement
for the financial year ended 30/6/2022
Product Sales
Service revenue Less cost of goods sold Gross Profit
Less operating expenses
Wages expense
Leave entitlements expense Warranties expense
Bad & doubtful debt expense Fines & penalties
Legal costs
Rent expense
Interest expense Depreciation – Machine Income tax expense
Net profit
7,808,000 3,026,000
2,708,500 312,520 390,400 390,400 121,720
73,000 167,700 173,100 484,900
10,834,000 4,060,160 6,773,840
4,822,240 1,951,600
Accounting Policies and Additional information:
⮞ The company tax rate is 30%. Tilly’s reports using the Australian financial year ending 30 June.
⮞ There was a nil opening balance for unpaid employee entitlements (i.e. Wages due, and Provision for staff leave).
⮞ On average, staff only took 3 weeks of leave entitlement. The total leave bill paid was $156,300.
⮞ The opening balance for Prepaid rent was zero as on 1 July 2021, Tilly’s Tiles & Bathroom Fittings moved into a new premises and paid 14 months of rent in advance.
⮞ All sales are assessable income at point of sale. The opening balance of allowance for doubtful debts was $68,700.
⮞ This is the first year they offered warranties, therefore the opening balance of provisions for warranties was $0. Tax law allows a deduction when customers make a claim.
⮞ A quirk of tax law means Tilly’s Tiles & Bathroom Fittings has a 2021 carry forward tax loss of $243,000 despite their retained profits.
⮞ Tilly’s Tiles & Bathroom Fittings is on an upward trajectory and is expected to make significant future profits.
⮞ The machinery was bought 1 year(s) ago.
⮞ For accounting purposes, the machinery is depreciated on a straight-line basis over 8 years.
⮞ For taxation purposes, the machinery is depreciated on a straight-line basis over 5 year(s).
⮞ The machine has an expected residual value of $20,800.
⮞ Supply chain shortages means that Tilly’s now asks customsers to pay in advance since 1 Jan 2022. Before this, no customer has ever prepaid.
⮞ All fines, penalties, and legal expenses are paid when incurred, however only legal fees are deductable.
⮞ Ignore GST and Superannuation. All other expenses not discussed are paid when incurred.
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