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Jasper Orange Co’s trial balance at 31 Dec 20X3 shows a debit balance of $700,000 on current tax and a credit balance of $8,400,000 on deferred tax. the directors have estimated the provision for income tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates to property revaluation.
What is the tax liability recognized in Jasper Orange Co’s statement of financial position for the year ended 31 Dec 20×3?
I have difficulty sorting out the T account, please assist me on that, especially this part “the directors have estimated the provision for income tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates to property revaluation.”
The answer to this question is $1.2million.
I have figured out the T accounts for both current tax and deferred tax. but i would like to know why do we debit $5.6m of deferred tax provision in deferred tax T account? and debit $4.5m in current tax account too?
The two figures that you mention are the closing figures for the period and are both credit balances at the start of the next period. It is therefore the case that the carried forward balances will be on the debit side when we balance off the T-account at the end of the reporting period.