[Zohaib]

Amazing Sir, Got it,

I was comparing the closing liability of $5.6m with $ 8.4m giving a debit of $2.8m. Further i did the below double entry:
Dr $ million Cr $ million
Deferred Tax liability 2.8
Revaluation reserves 1.2
Income Tax Expense 1.6

Sir, But according to your explanation what will be the double entry?

[Zohaib]

Sir my answer is D.

[Zohaib]

A company’s trial balance at 31 December 20X3 shows a debit balance of $700,000 on current tax and a
credit balance of $8,400,000 on deferred tax. The directors have estimated the provision for income tax for
the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates
to a property revaluation.
What is the profit or loss income tax charge for the year ended 31 December 20X3?
A $1 million
B $2.4 million
C $1.2 million
D $3.6 million

[Zohaib]

Ok sir…right now, I am typing the question…please you may assist me now, I will be extremely obliged.

[Zohaib]

https://www.ifrsbox.com/the-unconventional-guide-to-tax-bases/

[Zohaib]

I guess T1 should be inflated, it was not mentioned in the question for the operating cashflows to be the same in T1 and inflated further…WDA’s need to be calculated in the same way, balancing allowance will arise in the final year as there were no disposal proceeds…

[Zohaib]

Same here, my WACC with MVs was 6.2%, The IRR calculations were based on 3% and 10%….

[Zohaib]

Hi Guys, I wish you all to celebrate by passing in F9 on 8th of February?…

The way I did section B… (As far as I remember my answers)

Q1 part C…

Short term cash surpluses: Short Term cash surpluses tend to be temporary, while investing those management has to look for the three conflicting or say a trade-off between:
i) Liquidity
ii) Risk
iii) Profitability
A bit of discussion on the above points…
My analysis from past papers is that one should rarely go for a straight forward Yes or NO in answer, answer should reflect kind of reasons for Yes or No…

In Question 2, Conversion was likely…It was something around 131.02 I guess…The market value of the Convertible debt was 111 Approx.…What is did interesting here was to find a geometric growth rate, and did made an assumption that the growth is likely to be the same in the future…Then I found the Conversion Value…
For the P/E ratio part what I did was to use EPS * PE Ratio…
To discuss about the P/E:
It is based on one year PAT value…which may be distorted due to one-off transactions…while the share price can reflect the speculation about the future earnings, it is for majority Shareholders etc….
In Forward exchange contract the loss was something like $ 3500….
Invoicing in the dollars should be avoided because:
i) Might not be possible commercially.
ii) Company can win some and lose some.
iii) Need to establish separate Department.
iv) Saves management time.

WACC with market values…6.2 % and book values about 5%
Don’t remember exactly the NPV figure but it was between $1500 to $1700…I did comment on the Inclusion of Interest payments and Tax allowable Depreciation and in revised redrafting excluded both these cash flows which are not relevant…
BEST of Luck to me and you all…

[Author]

Posts