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During the year some items were revalued by $90,000. No items had previously
required revaluation. tax rate: 30%196 What amount should be charged to the revaluation surplus at 31 December 20X4 in respect of deferred tax?
A $60,000
B $90,000
C $18,000
D $27,000196 D (90,000 × 30%) will go to the revaluation surplus
why charge revaluation surplus with deferred tax ? why not charge profit and loss
Mark i just saw your answer. but the topic is closed for new replies.
ur answer was: This tax will only become payable when the revalued asset is disposed of so it may as well sit in the revaluation account because, when that revaluation gain is realised, that’s the time the tax will be payable.
so revaluation surplus will be charged 27,000 in addition to the revaluation surplus amount 60,000 so total 87,000 ?is it a rule that deferred tax related to revaluation surplus charged to O.C.I or its only an exception only in this situation ? and if its a rule can you tell me what it is the rule states.
Where there is a revaluation of TNCA, that kicks in the requirement for deferred tax
That’s pretty much all you need at F7
But sometimes the examiner will say “The deferred tax on the revaluation should be treated as part of the charge for the year”
In other words, instead of debiting Revaluation Reserve and crediting the deferred tax account, you make no adjustment other than to carry down as a liability that deferred tax on the revaluation
That therefore increases the balance on the deferred tax account which is in turn transferred to the current tax account and the balance on the current tax account is transferred to the statement of profit or loss as part of the tax charge for the year
Is that ok?
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