MAA363 Corporate Accounting Assignment

Assignment 1 Questions 

Part A 

Write a critical reflection on the article titled, “Labor and Coalition ramp up pressure on multinational  tax avoidance ahead of election” authored by Nassim Khadem published in the ABC News website. A  PDF version of the article is available in the Assessment 1 folder. Alternatively, you can access to the  article using the following link: 

https://www.abc.net.au/news/2022-04-05/labor-multinational-tax-avoidance-election-plan transparency/100965626 

Requirements: 

a) Critically evaluate, using the agency theory, why some Australian companies, which are  subsidiaries of multinational corporations, would choose to transfer profits to other tax  environments. 

b) Explain the arguments based on legitimacy theory that the ATO could use to encourage Australian  companies to record their profits and pay their taxes in Australia. 

c) What is your personal take after conducting this research?  

In your reflection, include in-text citations taken from appropriate authoritative sources (note that  Harvard referencing is required, including a reference list). 

Part B 

1. On 1 January 2022, Thom Ltd entered into a non-cancellable lease agreement to lease equipment  from Sanders Ltd for 5 years. The contract requires Thom Ltd to make half yearly lease payments of  $350,000 for 5 years, on 30 June and 31 December, each year, commencing on 30 June 2022. Included  within the $350,000 half yearly lease payments, is an amount of $35,000 representing payment to  Sanders Ltd for the insurance and maintenance of equipment. The equipment is expected to have a  useful life of 6 years, after which time it is expected to have a salvage value of $550,000. The bargain  purchase option is exercisable by Thom Ltd at the end of the lease term for $275,000. The equipment is  to be depreciated on a straight-line basis. The interest rate implicit in the lease contract is 6% per annum.  

Requirements: 

a) Calculate the lease liability and lease asset for Thom Ltd;  

b) Prepare a full lease schedule for Thom Ltd., showing the division of the lease rental into interest  and principal components; and  

c) Provide the journal entries for the lease transactions in the books of Thom Ltd. for the financial  year ending 31 December 2022 (include journal entries at the inception of lease on 1 January  2022). 

2. This assignment relates to Topic 3 and 4 on Income Tax and requires the following to be submitted: An excel workbook with the following four (4) sheets: 

a. Sheet 1: Background Information 

b. Sheet 2: Calculating Taxable Income 

c. Sheet 3: Calculating DTA/DTL 

d. Sheet 4: Change in tax rate 

Requirements: 

a) Calculate the taxable income / tax loss and the current tax liability (if any) for the financial year  ended 30th June 2022. Prepare a journal entry to recognise the current tax liability / tax loss. (In Sheet 2: Calculating Taxable Income) 

b) Calculate deferred tax asset and deferred tax liability balances as at 30th June 2022. Prepare the deferred tax journal entries for the year ended 30th June 2022. Note that you are NOT  required to prepare journals to offset the deferred tax asset and deferred tax liability balances.  (In Sheet 3: Calculating DTA/DTL 2022) 

c) Assume that by 1 December 2022 there was a change in tax rate. With reference to AASB112  Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax  liability balances as of 1 December 2022 following a lower tax threshold for the 2022-2023  financial year. Prepare the journal entries to record the effect of change in tax rate. (In Sheet4: Change in Tax Rate)