The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r }
&\$\
\text { Interest revenue } & 500000 \
\text { Sales revenue } & 5000000 \
\text { Dividend revenue } & 1500000 \
\text { Depreciation expense } & 700000 \
\text { Wages and annual leave expense } & 1500000 \
\text { Other expense } & 3000000
\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.
-What is Penguin Ltd's period profit or loss (accounting profit after tax) using the balance sheet method of tax effect accounting?

Question

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } 
&\$\
\text { Interest revenue } & 500000 \
\text { Sales revenue } & 5000000 \
\text { Dividend revenue } & 1500000 \
\text { Depreciation expense } & 700000 \
\text { Wages and annual leave expense } & 1500000 \
\text { Other expense } & 3000000
\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.
-What is Penguin Ltd's period profit or loss (accounting profit after tax) using the balance sheet method of tax effect accounting?

Quizplus · Accepted Answer

Step 1: Calculate assessable income
Assessable income = Interest revenue + Sales revenue = $500 000 + $5 000 000 = $5 500 000

Step 2: Calculate tax deductible expenses
Tax deductible expenses = Depreciation expense + Wages and annual leave expense + Other expense
= $700 000 + $300 000 + ($1 500 000 - $100 000) = $2 400 000

Step 3: Calculate taxable income
Taxable income = Assessable income - Tax deductible expenses = $5 500 000 - $2 400 000 = $3 100 000

Step 4: Calculate income tax expense
Income tax expense = Taxable income x Tax rate = $3 100 000 x 30% = $930 000

Step 5: Calculate Period profit or loss (accounting profit after tax)
Period profit or loss = Assessable income - Tax deductible expenses - Income tax expense = $5 500 000 - $2 400 000 - $930 000 = $1 170 000
Therefore, the correct answer is B) $1 710 000.

The Following Information Was Extracted from the Accounting Records of Penguin