Query =" The tax base of keystone's net assets was $15 million less than their carrying amounts. This excludes effects of the revaluation of the leased property "
My english is not very strong and I am self studying from Opentuition, Ok soo my issue is that as far as i understand we multiply tax rate with Temporary difference, but in the the back at answers the examiner took $ 15 million + 8 million(Gain on revaluation) as a temporary difference and multiplied it directly with tax rate of 30% giving Deferred tax liability of 6.9m. Now i don't have any issue with the 8 million(Gain on revaluation amount) as i know that in case of revalued asset we take fair value not the Carrying value. But here why is the examiner directly multiplying tax rate with 15 million as it is not the temporary difference amount or maybe am not understanding what the question is trying to tell me.
Hi, because the question says the net assets were $15 million less than their carrying amount. This means the carrying amount is too low by $15 million so you need to add it on and then tax it
Sign in to reply to this topic.