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5. On 31 December 2010, Allysum estimated the tax charge for 2010 to be $230,000. The actual charge turned out to be $222,000 and this was paid in 2011.
On 31 December 2011, the tax charge for 2011 has been estimated as $265,000.
What amounts should appear in the financial statements at the end of 2011?
Statement of Financial Position Income Statement
A 257,000 265,000
B 273,000 265,000
C 265,000 257,000
D 265,000 273,000i don’t know what’s going on? could someone explain for me ?
The 2010 estimate of $230,000 turns out to be an over-provision by $8,000.
This over-provision of $8,000 is credited to profit or loss in 2011.
The estimated tax charge for 2011 is 265,000. It is debited to profit or loss.
So, for 2011, the net expense to profit or loss is 265,000 – 8,000 = 257,000.
The SOFP at end of 2011 includes only the provision for the 2011 estimate, i.e. 265,000.
Correct option is c.
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