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December 2011 question (a) -KEYSTONE sum in that why do we add 8000 for the deferred tax sir ????
The only $8,000 that I can see and to which you may be referring is the increase in the value of the leased property (from $40,000 to $48,000) and which we are told will create a deferred tax liability
Does that answer you?
but sir only part of the amount has to go to deferred tax right sir? that is 8000*30%=2400 will be deducted from defrred tax right sir ????
The liability exists as a result of the revaluation
So we need to have a carry forward figure of $8,000 * 30% = $2,400
That carry forward amount features on the debit side of the deferred tax T account with the narrative “Carried forward” together with the figure ‘give,’ to us of 30% * $15,000 = $4,500
So now we have a deferred tax liability of $4,500 + $2,400 = $6,900 and hopefully you’ll find that figure in the Long Tern Liabilities on the statement of financial position
However … that 30% * $8,000 relates to the deferred tax on the revaluation so, in keeping with the matching concept (aka the accruals concept) we can match that $2,400 with the $8,000 revaluation
So if we credit the Deferred Tax Account with $2,400 and debit the Revaluation Reserve with that figure, then we shall arrive at the correct position
Is that any clearer?
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