[eiman]

Mike! Why in the answer they mention the difference is due to s.h.e increase !! Why they didnt mention it is due to long term liabilities decrease !

[eiman]

Hi Mike, I listened to you, I tried solving the mini – exercises from opentution, It got more complicated. The answers lack the calculation, they put straight the number without writing how they arrived to the answer. for example this question below:

Question 2
Trial balance extract at 30 September, 2008
Income tax (credit balance) 400
Deferred tax liability 11,200
The balance of income tax in the trial balance represents the under/over provision of the previous year’s estimate. The estimated income
tax liability for the year ended 30 September 2008 is $18.7 million. At 30 September 2008 there were $40 million of taxable temporary
differences. The income tax rate is 25%. Note: you may assume that the movement in deferred tax should be taken to the Statement of
Profit or Loss.

Answer 2
Dr DT 1,200
Cr CT 1,200
Dr P or L 17,100
Cr CT 17,100

from where they brought the 1,200 ? how they calculated the 17,100 ? It is not helping me!

[eiman]

1- but why we take it directly $2.1 from T.B. whithout having to compare it against any other figure. (actual – estimated)
while credit balance of $5.4 million on deferred tax, we take the difference of what actually is and what was estimated.

2- what the scenario other than that it was a net(loss) so no tax expesnses were charged? what other than that ?

3- what if it was a credit balance ? what could be the scenario ?

[eiman]

sorry added.

Charge for year 16,200
Underprovision 2,100
Adjust deferred tax (W) (1,500)
Profit or loss charge =16,800

[Author]

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