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The profit before tax of Roxy Co was $750,000 for the year ended 31 March 20X3 after charging depreciation on building of $120,000. The tax allowance for the building for the year amounted to $150,000. The tax rate is 30% on the taxable profits. Without considering any adjustments other than the above, select which amounts will be reflected in the financial statements for Roxy Co for the reporting date of 31 March 20X3.
answer: Income tax expenses – $216,000 in statement of profit or loss
Deferred tax liability – $9,000 in statement of financial position
Current tax liability – $216,000 in statement of financial position
please give me a detail explanation of this question. many thanks!
Hi,
I’ll give you some help to see if you can make some progress with it.
Let’s start with the deferred tax as this is what you will likely see in the exam. From the information given we can calculate a carrying value and tax base. Just make up a cost for the asset and deduct the amounts given. You can then follow the steps for calculating DT as given in the class notes.
For the current tax then you need to adjust the PBT by adding back the depreciation before then deducting the tax depreciation. You can then apply the tax rate to get the amount in the SFP and SPL.
Give it a go and see how you get on.
Thanks
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