Deferred Tax Calculation

Hi Chris,

Below questing is from Kaplan ST

At 31 December 20X8, the tax base of Weiser’s net assets was $7 million less than their carrying amounts. This excludes the gain on the revaluation of the building. The income tax rate of Weiser is 30%.

Deferred tax C/F from TB – Cr 1,350
Gain on Revaluation – 4,000
Carrying value of the assets 31/12/20X8 – 34,500 (Include revaluation gain)

I calculated deferred tax liability as follows

Temporarily difference (34,500-7,000) = 27,500
(CV>TB = DT liability)

Deferred tax position @ 30% (27,500/100*30) = 8,520 (SFP)

Movement (8,250-1,350) = 6,900

Deferred tax on revaluation (4,000/100*30) = 1,200 (OCI)

Deferred tax (6,900-1200) = 5,700 (SPL)

Study text answer for above question is,

Deferred tax liability (NCL) – 3,000
Deferred tax on revaluation – 1,200
Deferred tax (SPL) – 750

could you please help me to understand where i have done the mistake when I calculating deferred tax. and also what is the meaning of “the tax base net assets”

Appreciate your response.