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At 1 January 20X8, Clarinet Co had an estimated income tax liability of $2,350. This liability
was settled by a payment of $2,050 made In March 20X8. Due to challenging trading
conditions, Clarinet Co made a loss for the year ended 31 December 20X8 and expects to
recover a repayment of income tax of $2,120 during 20X9.
What amounts should be included in Clarinet Co’s financial statements for the year ended
31 December 20X8 for income tax?
Statement of profit or loss
$2,420 tax charge
$2,120 tax credit
$2,420 tax credit
$1,820 tax chargeStatement of financial position
$1,820 tax recoverable asset
$2,120 tax payable
$2,120 tax recoverable asset
$2,120 tax recoverable asseti understand the sofp figure should be 2120 tax rec asset
but what should be the sopl figure i cannot figure out what working do we do to find thatThe question states that they expect to receive a repayments of 2,120 and so this is a receivable in the SOFP.
As at 1 Jan 20X8 the estimated that they owed 2,350. It turned out that they only owed 2,050 and so they had overcharged an expense of the difference of 300. This is corrected at the end of 20X8 and so they will show tax income in the SOPL of 300 together with the repayment expected of 2,120 – so a total of 3,420 credit.
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