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HI ! I want to ask how to solve this question
ABC Co’s trial balance shows a Deferred Tax Liability of $3.2 million and a credit balance of $2.1 million brought forward on current tax. In addition, the carrying amount of the net asset in excess of the tax base was valued at $8.2 million with a revaluation surplus of $3.6 million for the first time. The income tax and deferred tax rate is 25%. What is the amount of the income tax shown in ABC Co’s statement of profit and loss? (No decimals)
Hi,
When looking at the income tax expense figure you need to look at the current tax and deferred tax components. The current tax is given to you in the question, the challenge is the deferred tax aspect.
When looking at the deferred tax aspect then remember the steps that we went through in the class notes and the videos.
1. Calc. TD where we compare the CV vs. Tax base. – Given in the question at 8.2 million. Just note that 3.6 million is revaluation, so only the difference of 4.6 million will impact profit of loss.
2. TD x tax rate 25%
3. Movement to profit or loss. So compare to the opening balance of 3.2 million to get the movement.Attempt the question given the above and let me know how you get on.
Thanks
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