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for question 197 of bpp revision kit 2016-2017, I think that tax payable should be 120( 75+45? the total deferred tax on PPE and development of 75000 should be credited to tax payable account as well as the tax charge of the year of 45000. I have read that when there is an increase in deferred tax, we should debit income tax expense and credit tax payable.why is the answer then not 120? may you explain?
The carrying amount of Julian’s property, plant and equipment at 31 December 20X3 was $310,000 and the tax
written down value was $230,000.
The following data relates to the year ended 31 December 20X4:
(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written
down value was $270,000. During the year some items were revalued by $90,000. No items had previously
required revaluation. In the tax jurisdiction in which Julian operates revaluations of assets do not affect the
tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.
(ii) Julian began development of a new product during the year and capitalised $60,000 in accordance with
IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been
amortised by the year end.
The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000. May you now answer my question?Well, that’s better. But I’m still struggling 🙁
Where are you getting these figures from in your original post? “120( 75+45?)”
The 45 I can see as you have taken the current tax charge from the question (are you sure that the question says that it’s the tax charge and not the tax liability)?
But the 75?
What does BPP’s answer suggest?
the question is What amount will be shown as tax payable in the statement of financial position of Julian at 31 December
20X4?
A $45,000
B $72,000
C $63,000
D $75,000BPP answer is A $45,000. The tax charge for the year.
I have no idea! I can only imagine that you are not giving me the full question because there’s no way that I can arrive at $45,000
Have you checked the answer in the BPP text? Surely that must tell you how they arrive at the figure
I think the question only ask for tax payable ( current tax) as $45,000.
While $75,000 under Deferred tax. Two different accounts in SFP
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