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Hi guys,
Can help me understand this question? It is a Moby Qn 2 Dec 13 I have an issue with the income tax part particularly the deferred tax part.
Qn Given “Deferred Tax of $8,000 in (Cr) side of trail balance (as at 30 Sep 13). Adjustment required was “At 30 Sep 13, the tax base of Moby’s net assets was $24 million less than their carrying amount. This does not include the effect of revaluation of 4,400. The income tax rate of Moby is 25%.”
Ans (Given in ACCA report)
____Dr_____ _______Cr______
Provision bf at 1 Oct 12 (8,000)
Provision c/f required at 30 Sep 13
Taxable Difference: Given per Qn 24,000
On Revaluation 4,400
28,400 x 25% 7,100
—————
(900)
Charged to other comprehensive income on revaluation gain (4,400×25%) (1,100)Credit to P&L 2,000
What I dont get it is that why they are showing the revaluation gain 2 times and the net effect is zero for this qn? Shouldnt there be a tax effect of 4,400 x 25% added on to the deferred tax part?
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Anyone help me?????
go simply this way …
the revaluation gain – it is a virtual gain unless asset are set off. Now this gain is shown as imaginary increase in asset 4,400 amount – this is due to imaginary revaluation surplus 3300 and imaginary deferred tax of 1100. and this imaginary profits are accounted at comprehensive income deducting imaginary tax -3300.lastly answer set shows realization by taking revalued amount for depreciation purpose.. who is confusing questioner , answer provider you or me i dont know ..lolzz
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Thanks for the reply. The answer was not provided by me, I took it directly from ACCA website. I have uploaded the image of it, as this website has some formatting issues with the spaces and everything.
So can I just show the movement in taxable difference, for my deferred tax working, which also show just the movement of current assets which is (6,000-8,000) and showing the tax on RR on my OCI part of the P&L? Will I get penalised for not showing the RR tax for my deferred tax working?
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