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I´m having problems arriving at 17,1
What I see in this question is
PBT say 100
Current tax (18,7)
Deferred tax + 1,2
PAT =82,5Can you please explain me why we deduct the 0,4 and 1,2 from the 18,7?
In order to get the correct charge to the statement of profit of loss (correct CHARGE, not correct liability) we need to take into account that we already had $400 credit balance brought forward in the current tax account. As a result of the deferred tax adjustment, we no longer need $11,200 in the deferred tax account – we only need $10,000 – so the excess of $1,200 can be credited back to the current tax account.
That means that, whereas we were anticipating charging statement of profit or loss with $18,700 by crediting the current tax account, we already find $400 and $1,200 in the credit side of that account.
So now we only need $17,100 credit to the current tax account and debit / charge the statement of profit or loss by that amount
OK?
I understood, but I think there is an error in the answer, since the $1,200 is being credited in the statement of profit or loss instead of the current tax account.
I realised that this exercise can be done in 2 ways, we can either credit the excess deferred tax to the current tax account or credit it to the statement of profit or loss and then credit the current account tax and debit the statement of profit or loss by the balancing amount, which is $17,100 in the first case or $18,300 in the second.
Is there a preferred way?
It’s not a big deal! I had to show the entry to get 1,200 out of deferred tax and into Current Tax. The first 5 mini exercises were done before the remainder. Throughout the remainder (I believe) I have consistently done the transfer by naming the accounts Deferred Tax and Current Tax
In this question, I have taken the credit to SoCI instead of Current Tax
Thanks for pointing it out
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