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This a qusetion from Bpp Kit,
Jasper Orange Co’s trial balance at 31 December 20X3 shows a debit balance of $700,000 on current tax
and a credit balance of $8,400,000 on deferred tax. The directors have estimated the provision for income
tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which
relates to a property revaluation.
What is the tax liability recognised in Jasper Orange Co’s statement of financial position for the year ended
31 December 20X3?
A $1 million
B $2.4 million
C $1.2 million
D $3.6 million
Their answer is
134 C $1.2million
Prior year underprovision 700
Current provision 4,500
Movement of deferred tax (8.4 – 5.6) (2,800)
Deferred tax on revaluation surplus (1,200)
Tax liability for the year 1,20
They are asking for Tax liability which goes to the SFP and usually this is estimate we get it from Tax authority ,but here why we deducted the deferred tax movement ,that usually that what we do for the tax expense when add the movements,
as you said the deferred tax is internal calculation.
when we say the directors have estimated the provision is it the same as saying the Tax authority has given the estimate.