- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Could u help me?? I did but my answer was different
In Promugate’s trial balance as at 31/12/2015 there is a liability in respect of deferred tax of $38.4 million and current liability in respect of current tax $5.4 million
During the year Promugate’s taxable temporary timing differences increased by $20 million of which $12 million related to the revaluation of Promugate’s property. The deferred tax relating to this revaluation shoul be charge to P/L. The income tax rate 20%
No provision has not been made for the income tax liability based on this year’s profits not including the revaluation mentioned above. The directors have estimated the liability to be region of $22.8 million.
What will be tax charged in the P/L for year ended 31/12/2015?
1. Deferred tax
Provision required 31/12/2015 : $4 ($20@ 20%)
Proviosion at Trial bal: (7.68) (38.4 @ 20%)
Charge to Revaluation: (2.4) (12@20%)
Balancing: (6.08)2. Income tax
Per question: $22.8
Provison $ 5.4
Charge to P/L $(6.08)
Income tax paid: $ 22.12My answer $22.12
Can you help me????
“Proviosion at Trial bal: (7.68) (38.4 @ 20%)”
$38.4 is the amount of the PROVISION brought forward, not the extent of the difference between tax value and carrying value
Open 2 T accounts, 1 for Deferred Tax (DT) and 1 for Current Tax (CT)
DT Account
Debits
42.4 balance carried forward (that’s an increase of $4 on the brought forward figure and the $4 is 20% of the timing differences increase of $20)
Credits
38.4 provision brought forward
4 movement in the year debited to CT accountCT Account
Debits
4 double entered from DT account
22.8 provision carried forwardCredits
5.4 liability brought forward
21.4 (balancing figure charged to Statement of Profit or Loss as the year’s tax charge)Practice the mini-exercises on taxation towards the end of the free course notes – they are all extracts from past exam questions and are typically worth 4 or 5 marks
- You must be logged in to reply to this topic.