Question

For the below transactions, the owner is expected income tax of 25%. How would you record this in journal entry. What are the CR and DR? What is the process of calculating income tax, possibly using MYOB.

01-January-2016	Open business bank account with transfer of personal funds	$210,000
02-January-2016	EFT for rental of office space. Immediate occupancy. 60 months at $3500 per month.	$210,000
11-January-2016	Office equipment purchased for cash to get discount from the retail price of $56,000.	$50,000
11-January-2016	The office equipment will be replaced in 5 years at an expected cost of $67,000.	$67,000
13-January-2016	Bank loan approved and credited to account. Payable in 2021	$310,000
28-June-2016	Credit sales. EFT payment to be received in 90 days.	$65,500
04-July-2016	Employee timesheets submitted for work performed. Payment (EFT) to be made in 7 days.	$5,200
29-July-2016	Cash sales.	$33,500
12-December-2016	Credit sales. EFT payment to be received in 90 days.	$42,500
28-December-2016	Employee timesheets submitted for work performed. Payment (EFT) to be made in 7 days.	$5,720

Answer 1

Journal Entry

01/01/16	Bank Dr To Capital Account	210000	2100000
2/1/16	Rent (paid in advance) To Bank (3500*60)	210000	210000
11/1/16	Office equipment To Cash	50000	50000
13/1/16	Bank Dr To Bank Loan	310000	310000
28/6/16	Accounts Receivable Dr To Sales	65500	65500
4/7/16	Salary and wages Dr To Salary And wages payable	5200	5200
29/7/16	Cash Dr To Sales	33500	33500
12/12/16	Accounts Receivable Dr To Sales	42500	42500
28/12/16	Salary and Wages Dr To Salaries and Wages payable	5720	5720

Note: It's nowhere mentioned that payments to be made or Received within the given time are actually done. Hence, no entry is made.

Rent paid in advance for 60 months. This is adjusted accordingly.

Sales: (65500+33500+42500) 141500

Less: Cost of Goods Sold. NIL (no information)

Gross Profit 141500

Salary and wages ( 5200+5720) 10920

Rent (3500*12) . 42000

Operating Income. 88580

Less: Interest on loan Nil ( No info given)

EBT. 88580

Less Taxes 25% . 22145

NET INCOME . 66435