ACCA FR · Guided practice (Show me how)
Chapter 15: Income taxes (IAS 12)
Income taxes - current tax, deferred tax schedules and revaluations
Consider the following current and deferred tax cases.
(a) Calder - year ended 31 March 2015. The trial balance shows a credit balance of $400,000 on the current tax account. This balance is the under/over provision of the tax liability for the year ended 31 March 2014. A provision for current tax for the year ended 31 March 2015 of $3.5 million is required. Work in $000.
(b) Osborne buys an asset for $150,000 at the start of the financial year. The asset has an estimated life of six years and an estimated residual value of $30,000 (straight-line depreciation). Capital allowances are available at 25% reducing balance and the tax rate is 20%. Consider the next three years.
(c) Clarke bought a property for $500,000 on 1 January 2013. On 31 December 2015 the property had a carrying amount of $470,000 and was revalued to $800,000. The tax written down value at 31 December 2015 was $420,000 and the tax rate is 20%. Before the revaluation, the $50,000 difference between the carrying amount and the tax written down value arose during 2015; no deferred tax had been recognised on the property at 1 January 2015.
(a) Calder: current tax
Calculate Calder's current tax liability at 31 March 2015 and income tax expense for the year ended on that date.
(b) Osborne: accelerated capital allowances
Calculate Osborne's temporary difference at the end of year 1, deferred tax balances at the end of years 2 and 3 and deferred tax charges to profit or loss for those years.
(c) Clarke: deferred tax on a revaluation
Calculate Clarke's deferred tax liability and revaluation surplus at 31 December 2015 and the deferred tax charges to other comprehensive income and profit or loss for 2015.
Opening this exercise…