The following information relates to Godfrey Limited for the year ended 30 June 2014.
Accounting profit before income tax (after all expenses have been included) $300 000
Fines and penalties (not tax deductible) 20 000
Depreciation of plant (accounting) 40 000
Depreciation of plant (tax) 100 000
Long-service leave expense (not a tax deduction until the leave is paid) 8 000
Income tax rate 30%
On the basis of this information the current tax liability is:

Question

Quizplus · Accepted Answer

The taxable income is calculated by adjusting the accounting profit for non-deductible expenses and differences in depreciation. Taxable income = $300,000 + $20,000 (fines) - $60,000 (difference in depreciation) = $260,000. The current tax liability is 30% of $260,000, which is $78,000.

The Following Information Relates to Godfrey Limited for the Year