Carrying Value with residual value

Hello Sir,

In the following question of Bpp kit For the calculation of the carrying value they deducted the residual value from the cost and then they minus the depreciation is that correct,

Thanks,

Isaac & Joseph Co purchased new machinery on 1 January 20X5 for $1,000,000. It has a residual value of
$200,000, with the useful life deemed to be 8 years. The plant is depreciated on a straight-line basis.
Tax allowances of 50% of the cost of the asset can be claimed in the year of purchase, as depreciation is not
allowed for tax purposes. The rate of income tax is 30%
Identify whether a deferred tax asset or liability should be recognised at 31 December 20X5 and at what
amount?
Asset or Liability Amount ($)
Asset 90,000
Liability 82,500
60,000

Answer

Asset / liability Amount ($)

Liability 60,000

As the tax base is less than the accounting carrying amount (more tax benefit has been taken), then deferred
tax liability is required:
Carrying amount $’000
Cost of asset 1,000
Residual value (200)
Depreciable value 800
Depreciation charge
800/8 years
(100)
Carrying amount at 31 December 20X5 700

Tax base
Cost of asset 1,000
Less Y1 tax allowance at 50% (500)
500
Difference $700,000-$500,000 200
Tax liability 30% x $200,000 60