Pepper Ltd's Accounting Profit Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

Quesdon 4 Income Taxes (32 marks) Pepper Ltd's accounting profit for thc year ended 30 June 2018 was $250 000. The company income tax rate is 30,. Included in thc accounting profit were thc following items of incomc and expenses. • Depreciation expense.. The propcny. plant and equipment were acquired at $1 000 000 on 1 July 2015. It is depreciated on a straight-line basis over 5 years with zero residual value for accounting purposes. However, the taxation legislation requires Pepper Ltd to depreciate this asset over 4 years on a straight-line basis with zero residual value. • Bad debt expense: The company estimated and recognised 55 000 bad debt expense on 30 June 2018. During the financial period, 58 000 bad debts were written oft The Allowance of Doubtful Debts accounts has an opening balance of 54 000. • Employee benefit expense: $80 000 employee benefits expense was recognised. The Provision for Employee Benefits account has an opening balance of 5200 000 and a closing balance of 5240 000. • Entertainment expense: the marketing team incurred 57 000 on entertaining supplier and customer repmentatives. This amount was recognised as an entertainment expense. Required (a) Illus-trate impact of thc events above on current income tax calculations and prepare the journal entry to recognise current income tax expense for the year ended 30 Jtme 2018. (12 marks) (6) Prepare thc journal entries to account for deferred tax. for the events above. Show all calculations. (20 ma.) 
 

Question I t inancial Instruments and Foreign Currency Transactions (29 marks) On 15 March 2018, Aussie Cosmetics Ltd placed an order for inventory with Hua Wang Ltd, a supplier in China. The goods are delivered on 1 April 2018 with the payment due on 31 July 2018. The inventory's price is V500,000. Aussie Cosmetics Ltd is concerned that the exchange rate will fall resulting in a larger payment on the payment day (31 July 2018). To hedge against the risk, the company entered into a forward rate agreement with CBA Bank on 16 March 2018. The terms of the agreement are that Aussie Cosmetics Ltd will receive V500,000 on 31 July 2018 at the forward rate of AS1 = V 4.85. Aussie Cosmetics Ltd elected to classify this transaction as a cash flow hedge and to adjust the cost of the inventory as a result of the hedging transaction. The exchange rates on the relevant days are show in the table below: 
Date Spot Rate Forward Rate Agreement Rate 15 March 2018 ASI = g 4.80 AS1 = g 4.83 16 March 2018 ASI = g 4.83 AS1 = g 4.85 1 April 2018 AS1 = g 5.00 AS1 = g 5.05 30 June 2018 AS1 = g 4.60 AS1 = g 4.65 31 July 2018 AS1 = g 4.50 AS1 = V 4.50 
On 1 August 2018, the purchased inventory was sold for $500,000. 
Required Assuming that the hedge is effective, prepare the necessary journal entries for Aussie Cosmetics Ltd to recognise the transaction above. Aussie Cosmetics Ltd's financial year ends on 30 June. Ignore GST. 
 

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