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on 1 Jan 20X8 simon ltd decided to revalue its land for the first time. a qualified property valuer reported that the market value of the land on that date was $80,000. The land was originally purchased 6 years ago for $65,000
The required provision for income tax for the year ended 31 december 20X8 is $19,400. the difference between the carrying amounts of the net asset of simone(including the revaluation of the land in note (above) and their (lower) tax base at 31 Dec 20X8 is $27,000. The opening balance on the deferred tax account was $2600. Simon;s rate of income tax is 25%.
required: prepare the extracts of the financial statements to show the effect of the above transactions.
1. my question here is, opening balance on the deferred tax account $2600 is deferred tax asset or liability?
Hi,
I can only assume that it is a deferred tax liability given that the carrying value is higher than the tax base at the end of the year, and it does not state anything else within the question.
Where is the question from?
Thanks
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