Accounting for taxation BPP revision kit question 134

Hi, The $700,000 goes on the left hand side of the tax payable T-account as it is a debit balance. The closing position of $4.5 million is on the debit side as it is then brought forward on the credit side next year so that it can be paid. The balancing figure is then what is recorded within the statement of profit or loss. The answer to the question however is the $4.5 million as this is the liability at the reporting date. Thanks

Hi there, Thank you for your response, however, it doesn't match with the answer provided in the back of book. here is the answer $000 Prior year underprovision 700 Current provision 4,500 Movement of Deferred tax (8.4-5.6) (2,800) Deferred tax on revaluation surplus (1,200) Tax liability for the year 1,200) The problem is that I am unable to summarize the answer in T table format for my future reference for similar kind of question Thanks again for your kind response in advance. with regards Arjun

Hi can you please help me with this question Patrick Daley carries on business as a retail trader. The trail balance of his business as at 31 December 2017 was as follows Dr Cr $ $ Capital 255,600 Sales and Purchase 266,800 365,200 Inventory at 1 January 2017 23,340 Returns 1,200 1,600 Wages 46,160 Rent 13,000 Motor 3,720 Insurance 760 Irrecoverable Debts 120 Allowance for receivables: 1 January 2017 588 Discounts 864 1,622 Light and Heat 3,074 Bank overdraft Interest 74 Motor Vehicles at cost 24,000 Accumulated Depreciation 12,240 Fixture and Fittings 28,000 Accumulated depreciation 16,800 Land 100,000 Receivables and payables 17,330 23,004 Bank 3,412 Buildings at Cost 100,000 Accumulated Depreciation 1 Jan 2017 6,000 Drawings 20,800 652 654 652 654 You are given the following additional information: Inventory at 31 December 2017 was $25,680. Rent was prepaid by $1,000 and light and heat owed was $460 at 31 Decembers 2017 Land is to be revalued to $250,000 at 31 Decembers 2017 Following a final review of the receivables at 31 December 2017, P. Daley decides to write off another debt of $130. He also wishes to maintain the allowance for receivables at 3% of the year-end balance. Depreciation is to be provided as follows Building -2% annually, straight –line Fixtures &Fittings Straight line method, assuming a useful economic life of five years with no residual value Motor vehicles-30% annually on a reducing balance basis. Full year’s Depreciation is charged in the year of acquisition and none in the year of disposal. Prepare The statement of profit or loss for the year ended 31 December 2017 and a statement of financial position as at that date for Patrick Daley. (40 marks)

@singa31 said: Hi there, Thank you for your response, however, it doesn't match with the answer provided in the back of book. here is the answer $000 Prior year underprovision 700 Current provision 4,500 Movement of Deferred tax (8.4-5.6) (2,800) Deferred tax on revaluation surplus (1,200) Tax liability for the year 1,200) The problem is that I am unable to summarize the answer in T table format for my future reference for similar kind of question Thanks again for your kind response in advance. with regards Arjun

Hi, If they want the tax liability on the SFP, which is what the question you posed is asking, then this is the $4.5 million. The answer that is being given is the tax expense through profit or loss. Use the T-account as described to look at the current tax expense, and then adjust this for the movement on deferred tax. Thanks

@vanasheyvonne123 said: Hi can you please help me with this question Patrick Daley carries on business as a retail trader. The trail balance of his business as at 31 December 2017 was as follows Dr Cr $ $ Capital 255,600 Sales and Purchase 266,800 365,200 Inventory at 1 January 2017 23,340 Returns 1,200 1,600 Wages 46,160 Rent 13,000 Motor 3,720 Insurance 760 Irrecoverable Debts 120 Allowance for receivables: 1 January 2017 588 Discounts 864 1,622 Light and Heat 3,074 Bank overdraft Interest 74 Motor Vehicles at cost 24,000 Accumulated Depreciation 12,240 Fixture and Fittings 28,000 Accumulated depreciation 16,800 Land 100,000 Receivables and payables 17,330 23,004 Bank 3,412 Buildings at Cost 100,000 Accumulated Depreciation 1 Jan 2017 6,000 Drawings 20,800 652 654 652 654 You are given the following additional information: Inventory at 31 December 2017 was $25,680. Rent was prepaid by $1,000 and light and heat owed was $460 at 31 Decembers 2017 Land is to be revalued to $250,000 at 31 Decembers 2017 Following a final review of the receivables at 31 December 2017, P. Daley decides to write off another debt of $130. He also wishes to maintain the allowance for receivables at 3% of the year-end balance. Depreciation is to be provided as follows Building -2% annually, straight –line Fixtures &Fittings Straight line method, assuming a useful economic life of five years with no residual value Motor vehicles-30% annually on a reducing balance basis. Full year’s Depreciation is charged in the year of acquisition and none in the year of disposal. Prepare The statement of profit or loss for the year ended 31 December 2017 and a statement of financial position as at that date for Patrick Daley. (40 marks)

Hi, What is is that you want specifically helping with? I'm not just going to answer the entire question for you, sorry. Thanks