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Hi this is a question from Pre-June 2024 mock exam
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 DTL of $9000 in SOFP
My question: I think it is the movement in SPL since t the depreciation for the year and the tax allowance can be used to calculate only the movement which is reflected in SPL not SOFP since it is not the closing figure.
Furthermore, these not CV of asset and tax base; rather it is depreciation for the year and tax allowance.
Please help me understand why this is not $9000 in SPL
Hi,
Think about the approach to calculating the DT position. You need to look at the temporary difference by comparing the carrying value and the tax base, which you can do using the information in the question above. You then take this temporary difference and multiply by the 30% tax rate, which should then give you the answer as above.
Let me know how you get on and I can help further if required.
Thanks.
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