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September 17, 2015 at 7:41 pm
Can anyone help me with this question?
For the year ended 31 july 2011 Norman made taxable trading profit of $1200000 on which income tax is payable at 30%..
a) A transfer of $20000 will be made to deferred taxation account. The balance on this account was $100000 before making adjustments for items listed in this paragraph.
b) The estimated tax on profits for the year ended 31 July 2010 was $80000, but tax has now agreed at $84000 and fully paid.
c) tax on profits for year 31 July 2011 is payable on 1 may 2011.
1) tax charged for 1 may 2012
2) tax liability in sfp at 31 july 2011
September 17, 2015 at 7:52 pm
Is it $360000 to sfp and $366000 to spl? ?
September 17, 2015 at 10:45 pm
I make it 384,000 and 360,000, if I have understood the question properly
What does the official answer say?
September 18, 2015 at 3:27 am
I don’t have the answers but please explain how you come to 360000 and 384000.
Thank You ?
September 18, 2015 at 8:12 am
In the Deferred Tax Account:
Carry down the balance of $120,000
Brought down balance of $100,000
Transfer to Current Tax Account $20,000
In the Current Tax Account:
Transfer from Deferred Tax Account $20,000
Cash paid $84,000
Carry down liability $360,000
Brought down liability $80,000
Current year tax $384,000 to SoPoL
So that was my answer.
But I have serious doubts about $20,000 transfer TO the deferred tax account.
I have interpreted this as an increase in the deferred tax balance but it could equally well be a decrease. If it is intended to be a decrease, then the double entry to record that $20,000 would be Debit Deferred Tax Account $20,000 and Credit Current Tax Account $20,000
This would change the balance to carry forward in Deferred Tax Account to $80,000 and would change the charge to the Statement of Profit or Loss to $344,000 ( the $360,000 would remain the same)
September 18, 2015 at 8:32 am
Answer is 360000 to spl as income tax expense .
In sfp – NCL – Deferred tax 120000,
and CL – income tax – 360000
Thank you ?
September 18, 2015 at 8:35 am
Ooup sorry its 384000 to spl
September 18, 2015 at 9:12 am
You said that you didn’t have the answer! Are you testing me?
November 24, 2015 at 3:14 am
Lol Mr Mike.. My thoughts exactly……..Was she Testing you?
October 31, 2014 at 12:59 pm
also please explain that if the DT is calculated by calculating the difference between CA less tax base then are we taking the FV in the revaluation example 3.
(FV – Tax base) *rate% i.e (800-500)*30%
why don’t we take the CV for calculating the temporary difference.
I am so confused by reading the article on DT lol… they took the CV for the revaluation example
October 31, 2014 at 7:49 am
could you please explain how do we calculate the tax written down value.. how it is 0 in this case (ex 2).
October 24, 2014 at 7:45 pm
I can’t understand the answer for Q2 of Mini exercise part 8 Taxation. Why do we deduct deferred tax from tax estimated? Can you give me an explanation for the answer?
October 25, 2014 at 9:19 am
The second line in the answer should read “Current tax 1,200”
The question gives us the liability, not the tax charge. The 1,200 transfer from Deferred Tax is because we are reducing the deferred tax provision from 11,200 down to 10,000.
In prior years we have charged Profit or Loss Accounts / retained earnings with 11,200 deferred tax (charged through the tax charge in the Profit or Loss)
Now we decide that we didn’t need 11,200. We only need 10,000. So debit the deferred tax account and credit the current tax account. That has the effect of reducing the tax charge in this year’s Profit or Loss but has no affect on the Current Tax liability on the Statement of Financial Position
October 25, 2014 at 10:01 am
Now, i understand the movement of deferred tax, but i still not clear about the first line of the entry in the answer. If you debit 17100 tax account and then credit it 1200, then tax charge in the SoCI is 15,900. I think the tax charge should be 18700-400-1200=17100
And the entry i would make is:
Dr Tax charge 18300
Dr Deferred tax 1200
Cr Tax charge 1200
Cr Tax payable 18300
I don’t know if i do wrong somewhere. Can you correct me?
October 25, 2014 at 10:35 am
Did you read my previous post? In particular, did you read the first line?
Your comment “still not clear about the first line of the entry in the answer”
The first line of the answer does not say debit the tax account. It says debit the SoCI (or Statement of Profit or Loss if you prefer to call it that)
The first line of my previous post says that the second line of the answer should not read “Cr SoCI Taxation” – it should read Cr Current Tax account (or Cr Current Liabilities if you prefer)
That leaves me with a balance to carry forward on the Current Tax Account of 18,700 liability (given in the question) and a tax charge in the Statement of Profit or Loss of 17,100
October 25, 2014 at 11:13 am
Yes, it is pretty much clear now. I’m sorry for not reading your post carefully, if i did, i would understand it sooner.
Thanks you very much for the reply.
September 18, 2015 at 12:39 pm
I dint hve the answers the time i was working on that question..
N thank you ?
August 31, 2014 at 5:29 am
Request your guidance to understand how do we know the amount of deferred tax to be released in future years. In example 2, 100,000 was DT in 2009, then you released 50,000 each in 2010 and 2011 . why cant we release entire 100,000 in 2010. Thanks
August 31, 2014 at 9:14 am
Because we’re comparing the company’s book value of their asset with the taxman’s value of their asset (comparing net book value with tax written down value)
In year 2, according to the working shown at the top of page 177(!) the figures are $200,000 compared with a tax value of $zero
The difference is now $200,000. Apply the tax rate to that amount and there is a deferred tax liability to carry forward of $200,000 * 25% = $50,000
But we brought forward a deferred tax liability of 25% * $400,000 = $100,000
Therefore we can release $50,000 of that $100,000 this year and next year we shall release the remainder
Is that ok?
October 8, 2014 at 8:10 am
October 24, 2014 at 5:22 pm
Hi mike ,
I would like to interrupt here that , where is the £50 DT for 2010 gone !! Could plz go through again ,
October 24, 2014 at 5:54 pm
The double entry is from the deferred tax account to the current tax account and the current tax charge to PorL is reduced by this released deferred tax credit
August 30, 2014 at 12:47 pm
Thanx for the lecturer but he is a bit fast,so i missed important points.
August 30, 2014 at 12:58 pm
Well, play it again! And again! There’s no limit to the number of times you can listen to the lecture.
And, if there’s any particular point that you don’t understand, post your question on this site on the Ask the Tutor page and I’ll get back to you
August 11, 2014 at 4:45 pm
Please i need help with this question which goes thus:
In a case where my accumulated withholding tax for the year exceeds my current tax asset, what is the acceptable accounting treatment for the over the years?
will this result in any treatment as Non-current asset item?
August 11, 2014 at 4:51 pm
Is this an F7 question? If it is, it almost certainly will not appear in an F7 exam!
In addition, I think that you have missed off one or two words.
I’m not really sure what “In a case where my accumulated withholding tax for the year exceeds my current tax asset, what is the acceptable accounting treatment for the over the years?” means
Are you sure that you have copied the question correctly?
August 11, 2014 at 4:59 pm
Yea its an F7 question.
What am trying to say is this:
how do you go about an issue where current tax asset has been over provided for. And the time period to recoup the excess is more than a year. Do treat the unrecoupable part as Non-current asset.
August 11, 2014 at 5:00 pm
how do you go about an issue where current tax asset has been over provided for. And the time period to recoup the excess is more than a year. Do you treat the unrecoupable part as Non-current asset?
August 11, 2014 at 5:05 pm
Well (I don’t recognise this as any F7 question I remember seeing!) if the time for recovering the overpayment has passed the I imagine you will have to write off that over-payment. It cannot be an asset if the company can no longer recover it
August 11, 2014 at 5:10 pm
thanks. i appreciate.
August 11, 2014 at 5:11 pm
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