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IN X company`s trial balance as at 31 dec 2015 there is a liability in respect of deferred tax of 38.4 m and current liability in respect of current tax of 5.4 m $.
During the year Xs taxable temporary timing differences increased by 20 m of which 12 m related to the revaluation of Xs property. the deferred tax related to this revaluation should be charged to the P/L statement. The company income tax rate is 20 %.
No provision has yet been made for the income tax liability based on this years`s profit not including the revaluation mentioned above. The directors have estimated the liability to be in the region of 22.8 m
What will be the tax charge in the P/L statement for the year ended 31 dec 2015.?Can you write the solution of this problem step by step please?
IN X company`s trial balance as at 31 dec 2015 there is a liability in respect of deferred tax of 38.4 m and current liability in respect of current tax of 5.4 m $.
During the year X companys taxable temporary timing differences increased by 20 m of which 12 m related to the revaluation of X companys property. the deferred tax related to this revaluation should be charged to the P/ L statement. The company income tax rate is 20 %.
No provision has yet been made for the income tax liability based on this years`s profit not including the revaluation mentioned above. The directors have estimated the liability to be in the region of 22.8 m
What will be the tax charge in the P/L statement for the year ended 31 dec 2015.?Can you write the solution of this problem step by step please?
Open 2 T accounts, one for deferred tax and one for current tax
Put in the brought forward figures of 38.4 and 5.4
Put in the carried forward deferred tax figure – it’s an increase of 20m x 20%
Of that amount, 12m x 20% needs to be transferred to the revaluation reserve
Balance off the deferred tax account and double entry the balancing figure to the current tax account
Put in the current tax liability 22.8 and carry it down
Balance off the current tax account and that’s the figure that is double entered as the tax charge for the year
OK
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