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Hi Sir
Could you please give me the calculation to find the answer of this below:The question is: There was a credit balance of $6.200 on this year’s trail balance on the current tax account & a balance on the provision for defered tax account of $31.600. The company has estimated the tax liability on this year’s results to be $ 22.200 & wishes to increase the provision to $40.000. Of the increase, one third is attributable to the revaluation increase of TNCA and should be treated accordingly.
What amount should be debited to the statement of Profit or Loss for this year’s tax charge if the corporate tax rate is 30%
Answers are: $6,660 $21,600 $42,667 $34,000Thanks for your help
Open two T accounts, deferred tax and current tax
Put in the two balances brought forward
Carry down from debit above the line to credit below the line the 22,200 current tax liability
Carry down from debit above the line to credit below the line the 40,000 increased deferred tax liability
That means that there is a missing figure of 8,400 on the DT account of which one third relates to a revaluation increase. One third of 8,400 is 2,800
Credit the deferred tax account with 2,800 and debit that amount to the Revaluation Reserve
The remainder of the 8,400 ie 5,600 is credited to DT account and debited to CT account.
Balance off the CT account and take the missing figure to Profit or Loss account
Ok?
That’s great news! And there are 15 examples from past exam questions in the supplement to the F7 notes on this site.
Keep practicing those and you’ll find that you can do the 4 marks’ worth of exercise in less than a minute! That saves you / gains for you over 6 minutes to spend on the preparation of the financial statements!
:-)))
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