Tax Liability

Hello Sir,

First of all when we talk about tax liability it means the figure which appears in the Balance sheet.

it should be composed of two things

The deferred tax balance : which I supposed it will be the total deferred tax amount during the year .

and the provision of tax for the year

right??

so how it was arrived at in the following qusetion.

Please clarify this critical point Sir,

Thanks,

Q

134 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

Answer

134 C $1.2million
$’000
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 1,200