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Q. Ullington Co’s trial balance shows a debit balance of $2.1 million brought forward on current tax and a credit balance of $5.4 million on deferred tax. The tax charge for the current year is estimated at $16.2 million and the carrying amounts of net assets are $13 million in excess of their tax base including a $3m revaluation surplus on fisrt time revaluation of buildings. The income tax and deffered tax rate is 30%
What amount will be shown as income tax recognised in the statement of profit or loss for the year?
A $15.6 million
B $15.9 million
C $16.8 million
D $18.3 millionPlease explain on how to arrive at the answer for this question
Thank you very much
Hi,
You will need to calculate the current tax charge, which I think is given in the question. To this figure you will need to calculate the deferred tax charge. This is done by looking at the movement in deferred tax balance.
The closing deferred tax balance is not given and so you will have to calculate this using the information given (temporary difference) but make adjustments for the revaluation. Deferred tax on revaluation goes through OCI and not profit or loss.
Let me know how you get on and I can then help further if you don’t get the right answer.
Thanks
Hello Sir,
Why we take the difference between 5.4 and 3 ((13-3)*30%). I understand that we need to adjust for 3 mln revalvuation, but why we take 5.4 – 3 = 2.4, what is the 5.4?
Thank you very much!
I have calculated the deferred tax is 2400 but not sure how to use this figure to calculate the final answer. Could you please help? Thank you
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