I have not understood Q3 , opening balance is : 2,600,000 ( credit ) , ending balance is : 6,750,000 ( credit ) , so it means 4,150,000 go to expense ? result should be ( 19,400,000-800,000 ) + 4,150,000 = 22,750,000 ?
Thanks
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Edward·
I struggled with this questions too, and i can see this comment is from 2021, but i will answer incase anyone else is curious.
It is because $3,750,000 of the balance in the closing deferred tax is attributable to an asset which was revalued. The deferred tax on revaluations of assets is shown in the OCI, and not appart of P/L. So the double entry for this would've been Dr OCI CR Defferred Tax.
The question is after the expense in the P/L, so we will deduct this $3,750,000 from the closing tax.
A
Abena·
can anyone help explain the answers to question 2. im completely lost
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Ecaterina·
Dear Tutor
Hi I really don’t understand all these 5 questions from these quiz - would be nice to see the video dedicated to one of them at least as an example. I am really struggling - I watched your video on T accounts in FR, and it’s clear but these 5 questions are really “killing” my brain:(((
Are all of those solved through T accounts? Can you please explain one of those 5 in a lot of details?
Thank you
Katya
H
Hassan Bashir Ahmad·
Explain Question No. 4 and question no. 5 please
because the explanation is missing in answers
H
Hassan Bashir Ahmad·
Understood both of those
I
isabellanova·
The quiz hasn't been helpful because the workings aren't clear and this isn't part of the notes
F
fahad100·
Sir i have a query in question 5 i couldn't understant whether 20X13 is prior year or 20 x2 is prior year.
M
mytissue03·
Please guide me on qn3.
1.How do u get the 400,000 in current tax account?
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hodonaxmed2019·
I got 4,150,000
H
hodonaxmed2019·
I dont know how they got 400,000 my final answer was 22,750,000 which is one of the options
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VYSHNAV·
CURRENT PROVISION - 6750
OVER PROVISION - (2600)
PROVI FOR REVAL - (3750) =400
M
Martin·
Yeah you have to read very carefully in this one, the phrase "as at" denotes that the Deferred Tax Provision of 6,750,000 is a balance and not the amount provided for the year - i.e. the expense amount. I also got 22,750,000 but after re-reading the question multiple times this is where I see the reference to the 6,750,000 as a balance, in which case all the workings make sense. Hope the Exam doesn't have any such trickery in it
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larryiskenny·
Anyone know what is the $400,000 in the Current Tax A/c debit? Please explain. The additional $400,000 in Deferred Tax Account is a DT liabilities from other PPEs?
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Anna·
Hello,
I'd like to ask about the solution to question 4 in the above Practice Questions on Income taxes. All the entries are clear for me except one. In the answer there is 60 current tax debit - why is it debit and not credit? I suppose that 60 on current tax a/c represents a movement from Deferred tax a/c "transfered" to Current Tax a/c to arrive at the tax paid. But, the balance on deferred tax a/c has actually increased (and not decreased) by 60 so there is 60 more credit on deferred tax a/c - shouldn't it therefore be also a credit on current tax acc if we "transfer" it?
Please let me know where I am wrong. Thank you in advance.
H
Hassan Bashir Ahmad·
If you draw t-accounts you will understand it
as the Opening balances of CT & DT on the credit side of t-accounts, i.e. $360+150. The charge to SOPL will be on credit side of t-account i.e. 280. Now add these up.
the Closing balances will be on Debit side of it i.e.$420+$170 , now add these up.
the Balancing figure will be on the debit side of the T-account and that will be $200.
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MikeLittleTutor·
OK Autumn, now we're getting somewhere!
However, what you have now sent is a complete record of the answer (maybe!)
Does your original question still apply? You asked "why does the tax expense for the current year appear as a Dr and not as a Cr in the Current Tax Account?"
According to your most recent post, the only debits in the Current Tax Account are the brought forward and carried forward figures (2,450 and 7,130)
I'm not at all convinced that you have correctly copied from an answer - I'm more inclined to believe that what you have posted is your own effort at answering this question! Am I correct?
The crucial point in this question is in the line "Tax liability for the current year has been estimated at 8,470"
You need to be aware that there is a BIG difference between the expressions "tax liability" and "tax charge" (also referred to sometimes as "tax expense")
The tax liability is the figure that appears BELOW the total lines of a T Account and, being a liability, it's on the credit side below the lines with the narrative "Brought down"
That being so, there must be a corresponding entry for the same amount on the debit side ABOVE the total lines with the narrative "Carried down"
The "Tax expense" / "Tax charge" is the amount that is double entered as a debit in the Statement of Income and a credit in the Current Tax T Account and is the figure that is calculated following the tax rules that are explained in detail in the lectures on this site for the Tax Paper (formerly known as F6)
IF you have copied the answer correctly, then the question should have read "The tax EXPENSE for the current year has been estimated ..." and, in that case, your post is correct.
But that then is not consistent with your original question "Why is the tax liability shown as a debit?" because, according to your post, it isn't!
IF the post is your effort, and if you have correctly replicated the question, the entries in the two T accounts for Deferred Tax and for Current Tax should be as follows:
Deferred tax
Current Tax (balancing figure) 1,110
Carried forward (per question) 2,100
From balancing figure in Deferred Tax 1,110
Tax charge to Statement of Income (balancing figure) 9,810
NOW we see the tax liability on the debit side of the Current Tax Account being carried forward onto the credit side
Is that any better?
PS I hadn't realized that this was a quiz question from the end of the chapter - if I had realized I could have saved you a lot of trouble typing it all out. Sorry!
A
Autumn·
Hi
Thank you for the explanation. The workings make more sense and I understand where I was going wrong. You were correct in assuming that I had posted my attempt at the answer.
Thanks again for the help!
M
MikeLittleTutor·
You're welcome
A
Autumn·
Hi,
I think that I have got a bit confused. Please could anyone explain why the tax expense for the current year appears as a Dr rather than a Cr in the current tax T account
I have placed my workings below;
Tax Expense Current Tax Deferred Tax
___________________________________ __________________________ __________________________
Dr Cr Dr Cr Dr Cr
Current Yr ex 8470 Bal. b/f 2450 Bal. b/f 3210
Current Yr Ex 8470 DTL(W1) 1110
DTL (W1) 1110
This is very difficult to work out which figures fit into which accounts
Please retype withCurrent Tax Account debits
Then Current Tax Account credits
Then Deferred Tax Account debits
Followed by Deferred Tax Account credits
In addition, please give the information about the tax charge for the year (from the question) and any other information that there is in the question relating to tax
THEN I can maybe help you
OK?
A
Autumn·
Hi,
Please accept my apologies, the previous workings did not send as intended. This question relates to question 1.
Information from Question:
trial Dr balance on Current Tax account 2,450
trial Cr balance on Deferred Tax account 3,210
Tax liability for the current year has been estimated at 8,470
Net assets have a carrying value of 7,000 greater than their tax base
Corporate Income tax rate is 30%
Current Tax account debits
Bal. b/f 2450
Bal. c/f 7130
Current Tax account credits
Current Year Tax Expense 8470
Deferred Tax Liability (W1) 1110
Thanks
It is because $3,750,000 of the balance in the closing deferred tax is attributable to an asset which was revalued. The deferred tax on revaluations of assets is shown in the OCI, and not appart of P/L. So the double entry for this would've been Dr OCI CR Defferred Tax.
The question is after the expense in the P/L, so we will deduct this $3,750,000 from the closing tax.
Hi I really don’t understand all these 5 questions from these quiz - would be nice to see the video dedicated to one of them at least as an example. I am really struggling - I watched your video on T accounts in FR, and it’s clear but these 5 questions are really “killing” my brain:(((
Are all of those solved through T accounts? Can you please explain one of those 5 in a lot of details?
Thank you
Katya
because the explanation is missing in answers
1.How do u get the 400,000 in current tax account?
OVER PROVISION - (2600)
PROVI FOR REVAL - (3750) =400
I'd like to ask about the solution to question 4 in the above Practice Questions on Income taxes. All the entries are clear for me except one. In the answer there is 60 current tax debit - why is it debit and not credit? I suppose that 60 on current tax a/c represents a movement from Deferred tax a/c "transfered" to Current Tax a/c to arrive at the tax paid. But, the balance on deferred tax a/c has actually increased (and not decreased) by 60 so there is 60 more credit on deferred tax a/c - shouldn't it therefore be also a credit on current tax acc if we "transfer" it?
Please let me know where I am wrong. Thank you in advance.
as the Opening balances of CT & DT on the credit side of t-accounts, i.e. $360+150. The charge to SOPL will be on credit side of t-account i.e. 280. Now add these up.
the Closing balances will be on Debit side of it i.e.$420+$170 , now add these up.
the Balancing figure will be on the debit side of the T-account and that will be $200.
However, what you have now sent is a complete record of the answer (maybe!)
Does your original question still apply? You asked "why does the tax expense for the current year appear as a Dr and not as a Cr in the Current Tax Account?"
According to your most recent post, the only debits in the Current Tax Account are the brought forward and carried forward figures (2,450 and 7,130)
I'm not at all convinced that you have correctly copied from an answer - I'm more inclined to believe that what you have posted is your own effort at answering this question! Am I correct?
The crucial point in this question is in the line "Tax liability for the current year has been estimated at 8,470"
You need to be aware that there is a BIG difference between the expressions "tax liability" and "tax charge" (also referred to sometimes as "tax expense")
The tax liability is the figure that appears BELOW the total lines of a T Account and, being a liability, it's on the credit side below the lines with the narrative "Brought down"
That being so, there must be a corresponding entry for the same amount on the debit side ABOVE the total lines with the narrative "Carried down"
The "Tax expense" / "Tax charge" is the amount that is double entered as a debit in the Statement of Income and a credit in the Current Tax T Account and is the figure that is calculated following the tax rules that are explained in detail in the lectures on this site for the Tax Paper (formerly known as F6)
IF you have copied the answer correctly, then the question should have read "The tax EXPENSE for the current year has been estimated ..." and, in that case, your post is correct.
But that then is not consistent with your original question "Why is the tax liability shown as a debit?" because, according to your post, it isn't!
IF the post is your effort, and if you have correctly replicated the question, the entries in the two T accounts for Deferred Tax and for Current Tax should be as follows:
Deferred tax
Current Tax (balancing figure) 1,110
Carried forward (per question) 2,100
Deferred Tax credits
Brought forward (per question) 3,210
Current Tax debits
Brought forward (per question) 2,450
Carried forward (per question) 8,470
Current Tax credits
From balancing figure in Deferred Tax 1,110
Tax charge to Statement of Income (balancing figure) 9,810
NOW we see the tax liability on the debit side of the Current Tax Account being carried forward onto the credit side
Is that any better?
PS I hadn't realized that this was a quiz question from the end of the chapter - if I had realized I could have saved you a lot of trouble typing it all out. Sorry!
Thank you for the explanation. The workings make more sense and I understand where I was going wrong. You were correct in assuming that I had posted my attempt at the answer.
Thanks again for the help!
I think that I have got a bit confused. Please could anyone explain why the tax expense for the current year appears as a Dr rather than a Cr in the current tax T account
I have placed my workings below;
Tax Expense Current Tax Deferred Tax
___________________________________ __________________________ __________________________
Dr Cr Dr Cr Dr Cr
Current Yr ex 8470 Bal. b/f 2450 Bal. b/f 3210
Current Yr Ex 8470 DTL(W1) 1110
DTL (W1) 1110
Bal. c/f 7130 Bal. c/f 2100
_____ ______ _____ _____
9580 9580 3210 3210
W1.
Temporary Difference = 7000
7000*0.3 = 2,100
Closing Deferred Tax Liability 2100
Opening Deferred Tax Liability (3210)
_____
(1100)
Please retype withCurrent Tax Account debits
Then Current Tax Account credits
Then Deferred Tax Account debits
Followed by Deferred Tax Account credits
In addition, please give the information about the tax charge for the year (from the question) and any other information that there is in the question relating to tax
THEN I can maybe help you
OK?
Please accept my apologies, the previous workings did not send as intended. This question relates to question 1.
Information from Question:
trial Dr balance on Current Tax account 2,450
trial Cr balance on Deferred Tax account 3,210
Tax liability for the current year has been estimated at 8,470
Net assets have a carrying value of 7,000 greater than their tax base
Corporate Income tax rate is 30%
Current Tax account debits
Bal. b/f 2450
Bal. c/f 7130
Current Tax account credits
Current Year Tax Expense 8470
Deferred Tax Liability (W1) 1110
Defferred Tax Account Debits
Deferred Tax Liability (W1) 1110
Bal. c/f 2100
Deferred Tax Credits
Bal. b/f 3120
Tax Expense Debits
Current Year Tax Expense 8470
W1.
Temporary Difference = 7000
7000*0.3 = 2,100
Closing Deferred Tax Liability 2100
Opening Deferred Tax Liability (3210)
Deferred Tax Moevement (1100)
Thank you for your help in advance, it is much appreciated.