Murray Ltd purchased a machine on 1 July 2015 at a cost of $160,000. The machine is expected to have a useful life of 3 years (straight line basis) and no residual value. For taxation purposes, the ATO allows the company to depreciate the asset over 4 years. The profit before tax for the company for the year ending 30 June 2016 is $450,000. The tax rate is 30%.
- a) Calculate the company’s taxable profit and hence its tax payable for 2016.
- b) Determine the deferred tax liability or deferred tax expense that will result.
- c) Prepare the necessary journal entries.