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Hi Mike,
Thanks for the help in the previous question. In Q2, how was the deferred tax on revaluation computed?
Thanks,
Mariam.
Also, how did we compute the value of $11870 for the retained earnings?
Regards,
Mariam.
According to the trial balance as at 1 October, 2012, land had a value at cost of $12 and buildings a value of $48 at cost
In addition, as at 1 October, 2012, there was accumulated depreciation on the buildings of $10 giving a net book value on the buildings of $38
Then comes the revaluation as at 1 October, 2012 and land is revalued to $16 and the buildings to $38.4 giving a revaluation surplus of $4.4
For the purposes of deferred tax, this surplus is multiplied by the current corporate tax rate of 25% giving us a figure of $1,100
OK on that?
“how did we compute the value of $11870 for the retained earnings?”
$11,870 is the figure for profit after tax for the year as shown in the answer to part a)
OK?
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