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balance at year end:
taxation 7000 cr
def tax 16000 crthe directors estimate the provision for current tax shd be 12000. the balance on def tax needs to be increased to 23000, which includes the impact of the increase in property valuation below:
property was revalued for the first time resulting in a gain of 10000. tax rate is 30%
my working:
provision ……………..12000
under/(over)…………..(7000)
inc/(dec) def tax……..7000
———————————-
=================12000but the the answer is 9000, as it is reducing 3000 as impact of revaluation.
but the impact has already been taken into account in the def tax so why the decrease?
PUT THE FIGURES INTO T ACCOUNTS!
Deferred tax account, debits $23,000 carried down
Deferred tax account, credits $16,000 brought down, $3,000 debited to Revaluation Reserve, missing figure to make credits add up to $23,000 debit total $4,000 and that $4,000 is debited to current tax accountCurrent tax account, debits $4,000 from current tax account, $12,000 carried forward
Current tax account, credits $7,000 brought forward, and $9,000 is the missing figure taken to profit or loss as the tax chargePUT THE FIGURES INTO T ACCOUNTS!!!!!
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